Corrective action on underwriting worth sacrificing top line, says Lewis
Zurich UK’s premium income dropped by 20%, in a year when the insurer took a tough stance on underwriting in personal lines motor.
Gross written premium (GWP) and policy fees totalled $3.2bn (£2.05bn) for last year, compared with $3.97bn for 2008. In local currency, premium dropped 5%.
Chief executive Stephen Lewis said the insurer was not afraid to sacrifice top-line growth if it meant tightening up underwriting.
Lewis said Zurich will increase personal lines motor rates up to 20% in March, depending on the profile of business.
Lewis said: “If that means we end up sacrificing some top line to take that corrective action then we’re prepared to suffer some shortfall, because at the end of the day, and I’ll think you’ll see it in the industry figures, it is not a line that we can continue to write at the combined ratios that are being delivered.”
Lewis said: “2009 was a continuation of a soft-cycle year – a tough year for all in the industry. I think results have been clearly affected because of personal lines motor, which is widely publicised.
“We clearly took some quite significant action in 2008 to right-size our business to help steer the way through 2009 and put us in a position to continue to move through and address the challenges that 2010 will throw at us.”
Lewis predicted that rates would increase across the board in 2010 as the industry battles some serious challenges. He said: “If you look at the 2008 FSA returns, and you exclude prior year, across most lines, they’re writing a combined ratio well-above 100, to the extent we see prior years run out. So clearly we’re going to need to see rates across most lines move in the right direction.
“Having said that, 2010 is still going to be an extremely tough year, not least because of personal lines, but across the board.”
Globally, Zurich’s 2009 general insurance operating profit was $3.5bn, down 2% in dollars but up 1% in local currencies.
Worldwide general insurance revenues were $34.2bn, a 4% decrease in local currencies. Combined ratio improved to 96.8%, compared to 98% in 2008.