Insurer expects £6m bill from St Jude storm in Q4

Large personal lines motor losses caused Ageas UK’s profit to fall 12% in the third quarter of 2013, said chief executive Andy Watson.

He also said that the insurer expects to incur £6m of claims in the fourth quarter from the St Jude storm which ravaged southern England last month.

Large motor losses

Ageas UK’s profit for the first nine months of 2013 was up 5.6%, but in the third quarter alone profit fell 12% to £24.6m from the £27.9m reported in the third quarter of 2012.

Speaking to Insurance Times following the release of Ageas’s nine-month results today, Watson said the main reason for the fall was that the company had incurred a number of “very large losses” in its personal lines motor book.

He said the losses had been caused by “very serious incidents”, but did not provide specific details.

However, he described the reason for the losses as “random” and insisted the claims were not part of a specific trend.

Watson said: “The nature of underwriting is that every now and again on a fairly random basis we are going to incur some large losses and that has been a feature of our third quarter.

“Our view is that there is no reason to change our long-term assumptions on large losses.

St Jude claims

Watson estimated that Ageas would incur £6m of claims from the St Jude storm across its underwriting businesses.

He said: “This is pretty much in line with our market share relative to the number that the ABI put out.”

The ABI estimated that UK insurers would collectively incur £130m of losses from St Jude, despite earlier estimates from Willis Re suggesting insured losses could be as high as £500m.

Watson added that the £6m would fit within Ageas’s usual loss expectations for the fourth quarter. He said: “If St Jude is the only event that hits during the course of the fourth quarter then that would be within our expectations.”

Rate movements

Ageas noted in its nine-month results that there is heavy competition in personal lines. Motor rates have fallen industry wide by between 12% and 14%, home buildings rates dropped 5.8% and contents rates by 3.8%.

However, Watson revealed that Ageas’s rate cuts were lagging these industry-wide levels. For the first nine months of 2013 Ageas lowered motor rates by between 3.5% and 4%, and it cut household rates by less than 1% over the same period.

Watson said: “When I talk about maintaining pricing and underwriting discipline you will see that we are not making huge changes and certainly not following the market down to the extent we are seeing elsewhere.”

Commercial improvement

One of the bright spots in Ageas’s nine-month 2013 results was the four-point improvement in the commercial and special risks combined operating ratio (COR) to an almost break-even level of 101.3%.

At the same time, Ageas has cut gross written premiums in this line by 22.1% to restore profitability. This has included exiting unprofitable schemes.

Watson said: “We have removed ourselves from a couple of schemes and we have been putting some pricing changes through.”

He added that the COR improvement showed the cutbacks were working, which has put the company in a position where it can think about growing its commercial book again.

He said: “We are seeing the benefit of those action plans now and we expect the benefits of those action plans to continue so that our commercial lines profitability will be in line with our targets and expectations.

“That gives us the opportunity to be more proactive about those accounts and look to grow them.”