Daily briefing: Monday – NIG feels the pain

The past caught up with NIG today. Fresh from a high-profile Biba conference and a well-received rebrand, the RBS-owned insurer has nevertheless felt the pain in its figures. As we revealed today, the insurer made an eye-watering loss of £78.8m in 2010 – a 25% increase on its loss the previous year.

We all knew that NIG was bleeding money from its personal lines business – that’s why it ran it off last year. It’s more of a surprise, and concern, that the commercial business, on which it chose to focus, is also running at a significant loss.

NIG’s combined operating ratio was 108% in 2010, with its loss ratio at 70% – up from 62% the previous year. With numbers like that, you’d think it would be hiking rates. On the contrary, as has been widely publicised, it has offered to undercut rivals on certain products with its controversial 'guaranteed to beat' offer.

At what price growth?

The numbers are historical, and NIG could credibly argue that it suffered from the recession and other market-wide factors, such as personal injury claims on its commercial motor book. It also went through something of a wilderness period before the installation of the current top team, led by John Greenwood, during which it was subject to constant speculation that it could be hived off from the main group.

Greenwood and his team do have a clear plan – and it’s around growth. The insurer has launched a broker club, NIG First, in a bid to build business with its preferred partners, and has new product launches planned later this year.

This is indicative of a wider problem for the whole RBS Insurance group. As it moves towards a sale or flotation in 2013, the group is seeking growth. Yet growth in a soft market often comes at the expense of profit.

Strength in numbers

Omega is the hottest ticket in town. The Lloyd’s insurer seems bound to be the next big M&A story following today’s revelation that Barbican has joined Novae and Canopius to vie for the firm.

As Solvency II approaches, the smaller Lloyd’s players are looking increasingly vulnerable. Why have two finance teams, two sets of actuaries and two onerous regulatory processes where one would do?

Ellen Bennett is editor-in-chief.