Profitable growth

Based on the latest FSA returns Royal & SunAlliance (R&SA) is Britain's biggest property underwriter, replacing Norwich Union at the top of the pile.

The returns show that R&SA's gross written premiums rose by £300m to £2bn in 2001. While Norwich Union's premiums slipped from just short of £2bn to £1.8bn.

Zurich remained the UK's third biggest property underwriter, according to FSA returns, but grew its book by nearly £200m. The Churchill Group rocketed up the table from ninth to sixth in the table and AIG appeared as a new entry at number nine. Just about everyone else in the market grew a little.

But what about profits? Well, things are looking up for the underwriters. In 2000, combined ratios ranged from 87% for Lloyds TSB to 133% for AXA. In 2001, the range was 68% for

AIG to 113% for Allianz. Such was AXA's improvement in the year that it moved above Allianz, registering an operating ratio of 111%.

For the market as a whole, it was a good year: not only growth, but profitable growth. But as equity returns are suppressed, combined ratios may have to come down further to feed in equivalent returns on capital. This must be galling for companies that have strived so hard to improve their efficiency. And as if this wasn't enough, it seems that a price war is looming. The AA quarterly survey (see page 13) has tracked a dramatic slowdown in premium inflation and a plateau appears to have been reached.

The end of the upward pricing cycle is not the only concern of insurance companies, fire losses are on the increase. And such is the concern at figures reported over the past two years that the ABI has commissioned research to find out what's going on.

Andy Cook
Editor Insurance Times