H1 results: Ageas UK profit dives as Ogden effects continue

Ageas UK’s profit dropped 68% in the first half of 2017 as the cut in the Ogden discount rate continued to weigh on the insurer’s results.

The Ageas UK profit for the first half of 2017 was €11.2m (£10.2m), down from €34.8m in last year’s first half. The total Ogden hit for the half came in at €31m.

The combined operating ratio (COR) deteriorated by 5.6 percentage points to 105.7% (H1 2016: 100.1%) because of a combination of Ogden and lower reserve releases from prior years.

Motor, Ageas UK’s biggest business line, was the main drag on the overall UK COR (see table). The motor COR jumped by 8.2 percentage points to 106.1% (H1 2016: 97.9%).

The underwriting slump came despite the household book returning to underwriting profit with a COR of 99.7% (H1 2016: 101.7%).

Ageas UK had already taken a big Ogden hit in the first quarter. The insurer said at the time that the change would continue to affect its results throughout the 2017 until the rate increases it had implemented to counter Ogden had earned through.

The insurer is expecting a further Ogden hit to profits of between €10m and €15m for the remainder of 2017.

Gross premium written fell 10% to €1.1bn (H1 2016: €1.2bn), but the company said the number was flat at constant exchange rates.

On a positive note, the previously announced €77m capital injection the parent group made into Ageas UK has pushed the division’s solvency ratio to 131% as at 30 June 2017 from 100.2% at the end of 2016.

Ageas group chief executive Bart De Smet said: “In the UK we continued to closely monitor the plans to strengthen the business in response to among others the impact of the recent Ogden rate adjustment.”