But prior-year reserve releases gave firm a profit boost
The ABI’s estimate of insured losses of £1.4bn from the December 2010 freeze is short of the mark, according to Groupama UK chief executive François-Xavier Boisseau.
Excluding motor claims, as the ABI estimate does, Boisseau estimates that the losses are £1.5bn, but including motor could be anywhere between £1.5bn and £2bn – “probably closer to £2bn”, he said.
In its full-year results, released last week, Groupama UK revealed that it had paid £7m above the normal claims level for the December freeze.
The claims hit personal household and motor, and also the commercial business, where Groupama has a property owners book. “The ultimate cost is difficult to estimate because claims are still being reported, especially in commercial business,” Boisseau said.
Despite the December freeze, Groupama UK’s profit rose 70% to £23.7m, compared with £14.1m in 2009. The profit was mainly driven by the commercial business, which Boisseau attributed mainly to prior-year reserve releases. Without the reserve releases, the commercial book would have broken even. “In terms of the current year, profitability is not satisfactory in commercial lines and I doubt if it would be for most of our competitors.”
Boisseau also bemoaned price cutting and increased commission payments in UK commercial lines. “As we still have the same level of price [in commercial lines] as 2007 despite inflation, now is not the time to give away discounts or more commissions,” he said.