Ageas half-yearly profits would have fallen but for a boost from the Ogden rate change

Ageas UK is “closely monitoring” its motor book after seeing further decline in its performance.

Motor scored a combined operating ratio of 90.6% in the first six months of 2018, but despite an increased focus on profitability that saw the book shrink slightly, the H1 COR this year was 98.8%.

For the first three months of 2019 Ageas’ UK motor book had reported a COR of 96.1%.

Chief executive Andy Watson said the performance this year has been dented by some large losses linked to an increase in severe third party injury claims.

Watson said the line had been analysed very closely, but that the result had not altered its risk appetite.

“There doesn’t seem to be any underlying cause either from an underwriting or from a claims handling point of view,” he said. “As we know large losses are fairly infrequent and they can be volatile.

“We are just seeing a period of volatility where we have seen more large losses than we have done in recent times.

“It’s a situation we are monitoring closely, but it’s not something we are concerned about at the moment.”

Young drivers

Ageas in May partnered with Marmalade on a three-year deal to offer three new products to young drivers.

The move marked a big shift in the Ageas strategy, with chief customer officer Ant Middle saying Ageas had previously been best known for offering car insurance to established drivers.

But Watson said while the line will continue to be monitored closely, he expected performance to return to previous levels in the near future.

“I don’t think we have all of a sudden opened ourselves up to large numbers of very risky customers,” he added.

Motor makes up the majority of Ageas’ UK portfolio. It wrote £403.9m of gross premium in the first six months of 2019 (H1 2018: £405.6m), while in household it wrote £129.8m (H1 2018: 140.4m) and in other lines £75.8m (H1 2018: £89.2m).

Ogden benefit

Ageas would have seen its half-yearly profits fall this year, were it not for a £24m boost it picked up through the change to the Odgen discount rate.

The firm saw profits overall for the half-year stage increase by £18.6m, from £26.8m. Without this one-off Ogden benefit, profits would have fallen by around £5.4m – a 20% fall.

However, as well as the hit on motor, Ageas did also encounter one-off costs for the first half of 2019 through the restructuring of the business.

Watson told Insurance Times these costs were at around £11m, and that no further restructuring costs were expected. The costs mostly related to the closing of Ageas centres in Stoke and Port Solent.

The firm has also been restructuring its UK senior management team, but with the recent appointment of Evan Waks as chief risk officer, Watson said the “jigsaw is now complete”.

Growth

While written premium was down 5% on where it was at the half year stage in 2018, Watson said this was a much smaller reduction than last year, and that there were signs the business would start growing in the second half of this year.

He said: “We are really starting to see a stabilisation of our top line, which is very much our plan this year, in fact we’re starting to see our motor account grow.

“In the most recent months we have started seeing our overall account grow, so we really are stabilising the top line, and looking to return to growth in the second half of the year.”

And he said key to growth plans would be relationships with brokers.

“We have a traditional strength in personal lines, but we would like to do more in commercial lines,” he said. “It’s why we have invested in beefing up the commercial underwriting teams and putting some colleagues in the regions to have closer relationships with brokers.

“We are seeing the benefits of that already and our commercial account is growing. We’d like to grow it further.”