Insurer has still to recover fully from slump ‘but momentum is strong and trajectory right’
Aviva has yet to fully recover from the slump in premium income it suffered in 2009, with UK general insurance net written premiums for the first nine months of 2010 remaining much the same as in the first three quarters of 2009.
However, Aviva chief executive of UK general insurance David McMillan insisted the quarterly net written premium trends indicate his business is heading in the right direction.
He said: “If you go back to the first half of 2009, we were still in quite sharp decline. What has happened now is that we have reached the bottom of the decline and the momentum of the business is very strong.”
McMillan said that, based on the current trajectory of quarterly net written premium, full-year 2010 revenues from UK general insurance should come in ahead of those in 2009.
Aviva’s UK general insurance net written premium, excluding the heath and Aviva Re businesses, were £2.992bn for the first nine months of 2010, compared with £2.986bn for the same period in 2009. However, the third-quarter 2010 net written premium, at £1.05bn, was 12% up on the £937m reported in the third quarter of 2009.
Quarterly UK general insurance net written premium hit a low of £880m in the fourth quarter of 2009, but has been increasing each quarter since then: Q1 2010 net written premium was £913m and Q2’s was £1.03m.
Aviva has unveiled plans to deliver £200m of cost savings and a further £200m of efficiency savings by the end of 2012, and McMillan said the company had been growing in personal lines, given hardening prices.
It has also seen growth in its new corporate risks division, and McMillan expects this unit to post 20% growth this year.
McMillan said the main drivers of growth are corporate risk and specialty business.
He said: “We have a very strong presence already in commercial SME business and we are holding our own, but I don’t see massive shifts in market share because we are already very strong.
“Corporate risk and specialty lines have historically been a lot weaker, and that is where there is room for growth for us.”
McMillan added that there is also an opportunity for growth in broker personal lines business, where the company had been historically strong “but less so in recent years”.
He pointed to the nine-month combined ratio of 96%, an improvement from the 98% posted in the first half of the year, as a sign that the business is heading in the right direction.
He added: “The improvement is driven by a lot of hard work over the last two or three years on our expenses, underwriting, pricing and effectively managing our loss ratio.”