Daily briefing: Tuesday - The LV= turnaround

“We are very confident about getting a combined ratio below 100% and hitting 97% or 98% in 2011,” said LV= general insurance chief executive John O’Roarke in an interview with Insurance Times in February. The insurer boss was speaking in the wake of his business posting a combined operating ratio of 104.2% in its full-year results for 2010.

Today the insurer revealed its numbers for the first half of 2011, and it seems like the turnaround predicted by O’Roarke is starting to take shape. LV=’s combined operating ratio fell to 98.1% in the first half of the year, meaning it has returned to underwriting profitability. During the same period last year, COR was 101.9%.

The underwriting momentum is reflected in LV='s early profits too. Pre-tax profit rose 53% year-on-year to £52m on gross written premium of £704m, a 29% increase.

LV='s fight for growth

The bulk of LV=’s growth is coming within its direct motor insurance business, where it has seen GWP increase 58% to £273m since the start of the year. Competitive premiums have helped LV= grab some market share off its rivals, sending it to around fourth place in the league table of motor insurers.

In its most recent television advertising campaign, LV= claims to be adding around 1,000 new customers each day. Although it denies doing this by seriously undercutting its closest competitors, O’Roarke claims that "sensible" price cuts have helped make it more competitive on aggregators, becoming attractive to policyholders who are frustrated by large increases in their motor insurance renewals.

Brokers have also been piling their business into the insurer, with this part of the operation growing 18% to £354m. Speak to brokers and many will tell you that LV=, along with its close rival NIG, are two insurers that are currently fighting hard for brokers' business.

But whereas NIG’s parent Royal Bank of Scotland Insurance is growing in expectation of a flotation in the next two years, LV=’s motivation to expand rapidly is a little less clear. It is a mutual insurer, leaving it free to make its own decision without any pressure from shareholders in the way that RBSI would have. But its biggest challenge will be to consistently produce an underwriting profit on the back of adding a large volume of business on competitive terms.

Covea aggregator coup

Last week we reported that French mutual insurer Covea, owner of MMA, was launching a new aggregator in a bid to shake up the price comparison space.

Today it was announced that experienced aggregator boss Debra Williams is to take the hot seat. It’s a massive coup for Covea, as Williams is the former chief executive of Confused.com and Tesco Compare.

With plans to spend millions on marketing, expect Williams to soon be sowing seeds in the aggregator space.