COR rises five points because of 8% cut in GWP

Lloyds Banking Group’s general insurance (GI) business made an underlying profit of £297m in 2013, down 27.3% on the £409m it made in 2012.

The profit drop was mainly caused by a change in the internal commission arrangement between the insurance division and the group’s retail banking division, which distributes the insurance unit’s home insurance products through its branches.

The change cost the insurance division £77m. The result was also affected by the continued run-off of discontinued books of business.

The insurance division was also hit by a five percentage point increase in its combined operating ratio to 77% (2012: 72%).

This was mainly caused by an 8% drop in gross written premium (GWP), while costs remained the same.

GWP fell to £1.3bn in 20213 from £1.4bn in 2012. The bank said the reduction was partly because of its discontinued credit book but also a result of its focus on value rather than volume in home insurance.