But continued falling motor rates pushes premium income down by 4% in first half of 2014
LV=’s general insurance business made an operating profit of £46m in the first half of 2014, up 7% on the £43m profit it made in the same period of 2013.
Underwriting profit also increased, by 24%, to £21m (H1 2013: £17m), while the combined operating ratio dropped to 96.9% from 97.9%.
Premium income fell 4% to £720m (H1 2013: £748m) because of falling motor rates.
But the insurer said despite the drop in premium income, the profit figure showed the impact of its disciplined approach and refusal to write car insurance business at “unacceptable” profit margins.
The insurer said the overall underwriting profit benefited from prior-year reserve releases of £58m. This mitigated falling profit margins for business earned in the first half of 2014, caused by “severe” price competition in the market.
The direct and broker channels contributed to the operating profits at £29 million (H1 2013: £23 million) and £17 million (H1 2013: £20 million) respectively. The broker channel profit fell because of “uncompetitive” personal lines pricing in intermediated motor.
The underwriting result also benefited from a decrease in operating expenses, which LV= said resulted from a continued focus on cost control.
LV= general insurance managing director John O’Roarke added: “In tough market conditions we have continued to grow our business and increase our profits so I am pleased with our half year results.
“Rates in motor continue to be challenging, but as we grow our business in commercial, home and our other lines, we are able to continue to deliver strong results.”
The insurer now has 4.5 million general insurance customers, taking on 130,000 new, mostly non-motor, policyholders during the six months to 30 June.
The insurer said it expected to see motor rates start to improve to more sustainable levels later in the year and into 2015.