Provident Insurance’s after-tax loss narrowed to £6.7m in 2010 from £27.8m in 2009 as the company’s effort to combat claims inflation started to bear fruit, can reveal.

The motor insurer's combined ratio dropped to 108% from 120.5%. The current-year loss ratio, excluding the impact of prior years, was 104% in 2010, compared with 121.2% in 2009. Claims incurred, net of reinsurance, fell to £134.4m from £164.7m.

In addition to its underwriting actions, the company set up a quota-share reinsurance arrangement under which 25% of the business written after 1 April 2010 was ceded to a third-party reinsurer.

“The full effect of the significant rating and underwriting actions taken in 2009 and 2010 is expected to result in a further improvement in the current-year loss and combined ratios in 2011,” the company said in a Companies House filing.

The motor insurer, which was bought in April by French insurance group Covea - the parent company of MMA Insurance - was hit hard by rising bodily injury claims in 2009.

Provident said the underwriting and pricing actions had reduced policy count by 9% to 435,000 from 495,000. However, gross premiums written increased by 14% to £187.9m from £165.3m.