Ageas chief says reporting affected by timing of action over bodily injury
Timing is the key to why insurers’ results are responding differently to the bodily injury claims wave, according to Ageas UK chief executive Barry Smith.
Most agree that the rise in bodily injury claims is a problem for the entire UK personal lines motor market, as highlighted by industry-wide rate hikes. However, the trend has not affected all companies equally. For example, Royal Bank of Scotland Insurance, whose portfolio is heavily weighted towards motor, has repeatedly added to reserves this year, while Admiral, which writes motor almost exclusively, has continued to release reserves.
“There is a lot of evidence from all perspectives that there is an increase in the frequency and severity of bodily injury,” Smith said. “The question therefore is when companies pick up these trends and when they account for them. That is why the 2009 and probably even 2010 year of account will show different results for different companies.”
Ageas UK’s results continue to be affected by bodily injury claims. The company’s £16.6m pre-tax profit for the first nine months of 2010 was 50% down on the £32.2m it made in the same period last year. Ageas attributed the drop in part to severe weather at the beginning of 2010, poor private motor performance and lower investment yields.
The results were also hit by £12m in exceptional costs related to the acquisition of Kwik Fit and the start-up of the insurance partnership with supermarket group Tesco.
The combined operating ratio for Ageas UK’s general insurance business increased slightly to 104.9% in the first nine months of 2010 from 104.6% in the same period last year.
However, Smith is upbeat, pointing to the fact that the nine-month 2010 combined ratio was better than the 106.5% posted for the first half of the year. In the third quarter alone, the ratio was 102%. “We have seen positive and strong evolution, quarter on quarter, during 2010,” he said.
Smith said Ageas spotted the bodily injury claims trend in the third quarter of 2009 and booked an associated loss in the fourth quarter. He stressed, however, that the charge was not related to prior-year reserve strengthening.
When asked if Ageas would need to strengthen motor reserves, Smith said: “We have been very encouraged by the developments and we will announce our year-end results in due course.”