Division COR improves to 100% after more selective underwriting

Barry Smith, Ageas

Ageas UK’s commercial lines book grew more slowly than expected in the first half of 2012 as the company sought to avoid unprofitable business, said chief executive Barry Smith.

However, he added that slower growth was paying off, as the first-half commercial combined ratio improved by 4.3 percentage points to a break-even position of 100%.

“We still want to invest in and build the commercial book but we are finding that we have got to strike a natural balance between profitability and growth,” Smith told Insurance Times following the release of his company’s first-half results.

“It is quite natural that if you are pricing for profit, you are going to write less business than you would have otherwise anticipated.”

He added that the 100% commercial combined ratio compared favourably to those released by competitors so far.

“We are probably quite happy to keep the combined ratio at about that level, so let’s see what more growth we can generate over a return that we think is reasonable for us in the context of our ambition to grow into the commercial market,” Smith said.

Ageas revealed this morning that its commercial gross written premium in the first half increased by 4.4% to £81.8m (H1 2011: £78.4m). This is far slower growth than the division has reported in previous periods. For example the first half 2011 figure was a 32.5% increase over the first half of 2010.

Smith pointed out that commercial lines are still tough in the UK, and said it was difficult to see signs of improvement in prices. “There is a little bit [of improvement]  in fleet and a little bit in commercial vehicle but broadly you wouldn’t say you’re seeing any rate increases in commercial.”

Another area of Ageas that slowed down at the first half was the retail broking division, where profits dropped 8% to £16.5m (H1 2011: £18m).

Smith attributed this to competition for new business, coupled with low premium levels. “It has been a tough six months’ trading in retail,” he said.

However, he added: “The profitability both in absolute terms and as a contribution to the UK profits is still significant.”

Ageas UK’s overall first-half 2012 pre-tax profit, which includes retail, non-life and life protection business, surged 81% to  £64.1m (H1 2011: £35.4m).

“We’re very pleased with the first six months,” Smith said.