Ageas UK hails improved quarter-on-quarter performance despite Ogden hit

Ageas UK made a pre-tax profit of £25m in the first nine months of 2017, less than half the £52.8m the insurer made in the same period last year, as the Ogden rate cut continued to drag on results.

The combined operating ratio (COR) was an unprofitable 103.7% (nine months 2016: 99.7%), mainly driven by a 102.8% COR in the company’s motor business – it’s biggest line (see table below for full breakdown).

Ageas UK COR nine-month COR breakdown

 Nine months 2017Nine months 2016Change (points)
Accident and health 106.6 105.1 1.5
Motor 102.8 99.3 3.5
Household 99.7 98.7 1
Other lines 115.5 102.6 12.9
Total 103.7 99.7 4

The company said the COR deterioration was mainly driven by the cut in the Ogden discount rate to minus 0.75% in March.

It also said that it still has €5m of Ogden costs to pay in the last quarter of the year, in line with previous statements.

However, the company said that excluding Ogden, the UK-wide COR would have improved to 99.3% from 99.7%, because of improvements in current year motor claims.

It also said that its underlying performance quarter by quarter had improved. Profit before tax for the third quarter of 2017 alone was £14.9m. While this was down on the £18.2m reported in the same quarter of 2016, it was an improvement on the £10.2m reported in the second quarter of 2017.

‘Good result’

Ageas UK chief executive Andy Watson (pictured) said of the third quarter numbers: “We have delivered a good result continuing an improved underlying performance.”

The government has issued draft legislation that could raise the Ogden rate to between 0% and 1%, which could reverse some of the pain Ageas and other insurers have suffered since th cut to minus 0.75%.

Watson said: “We were pleased with the government response to the consultation on Ogden, reinforcing as it did the principle of full compensation yet recognising the reality of how claimants invest their monies.

“If enacted it would result in legislation that was fundamentally fair to claimants, defendants and society.

“However, there is much work still to be done until we can be confident that this outcome will be reflected in legislation. Until that happens our planning will assume the current discount rate.”

In its group results, Ageas said that it did not expect a final decision on the new Ogden legislation before the first half of 2018.