General insurance profits surge while motor plunges into £40m loss
Norwich Union's (NU) personal motor account slipped further into the red in 2005, despite a 23% increase in general insurance operating profits.
In its preliminary report for the year ended 31 December 2005, the insurance giant reported operating profits of £970m. Net written premiums were £5,832m - up from £5,437m in 2004. The combined operating ratio (COR) for the UK business improved by one point to 96%.
But, while the insurer's commercial lines business saw increasing profitability, personal lines fared less well (see box).
NU's personal motor book saw underwriting losses more than trebled, from a £12m loss in 2004 to a £40m loss in 2005. This was against an 18% increase in net written premiums to £1,641m and a 4% increase in rates.
Mark Hodges, managing director of NUGI, defended NU's performance in personal motor saying the COR had remained stable at 102% and cost savings had been made in the supply chain.
Asked whether NU would be prepared to see its market share shrink in order to boost profitability he said: "We will put profit before volume."
Hodges added that he would like to see rate increases in 2006 of between 4% and 6% in line with claims inflation.
Growth in NU's direct operation outstripped that of the UK business overall, achieving 15% year-on-year growth against 3% underlying growth across the whole of the UK portfolio. Internet sales rocketed with growth of over 200%.
Hodges would not reveal the level of growth in the insurer's intermediated business, but he stressed that the growth in the direct business was not "at the expense" of brokers. "Intermediated is the largest part of the business," he said.
NU reported that the integration of RAC had "largely been completed". It was on target to achieve the pre-tax savings of £100m by 2006 and deliver annualised operating profit of £250m from the acquisition.
Post acquisition profits for RAC were £59m in 2005.
RAC Direct Insurance will be launching a homeowner product in March.