COR at 92.1% is best ever; outlook “positive” for rest of year
LV= said its general insurance profit rose 52% to £70m in the first half, from £46m a year earlier.
Underwriting profit rise by 152% to £53m (H1 2014 £21m), and the combined ratio improved to 92.1% (H1 2014 96.9%).
Premium income rose to £729m (H1 2014 £720m) and pre-tax return on capital of rose to 18.1% (H1 2014 12.4%).
LV= said its customer base stable at 4.6 million, unchanged from the end of 2014, as it continues its diversification into non-motor lines of business.
It said it is seeing high renewal rates of 80% and 84% on direct motor and home insurance.
“We have had an excellent first half of the year. Our improved combined ratio of just over 92% is our best ever, demonstrating disciplined management of underwriting, claims and costs,” said John O’Roarke, managing director of LV= GI.
“The outlook for the remainder of the year is positive. I believe our proposition of great customer service, competitively priced products, and our well recognised brand means LV= is in a strong position for future profitable growth,” he added.
O’Roarke said the first half result was partly driven by prior year reserve releases amounting to £55m (H1 2014 £58m ). He said, however that the prior year run off will be at a lower level during the second half of the year.
Both the direct and broker channels contributed to the operating profits at £52m (H1 2014 £29m) and £18m (H1 2014 £17m) respectively.
Investment returns at £17m were lower, (H1 2014 £25m) ”reflecting more challenging investment market conditions”, O’Roarke said.
“We have continued to diversify into non-motor lines with the proportion of non-motor polices now at 37%,” up from 33% a year ago, he said.
O’Roarke said the direct result was the best half-year result ever, with record sales of £416m (H1 2014 £408m).
He said the company has grown ”across all business lines” in the last quarter and now insures over 600,000 homes, while sales in road rescue have been particularly strong with 50,000 new customers joining since January.
“In Broker we have seen increased competition in commercial lines and so have managed growth to protect margins,” he said. However, he added, the group achieved a combined ratio of 95% in broker personal lines in the first half ””by prioritising margin preservation over market share”.
Better weather kept claimes costs down in the winter months, O’Roarke said.
”The motor market remains competitive across both direct and broker but we have seen some rate recovery during the first half of the year, helping us to protect margins from increasing personal injury claims costs, which continue to be problematic for the industry,” he said.