Aviva reports flat UK GI premiums but better COR

Aviva’s UK general insurance net written premiums, excluding the health and Aviva Re businesses, remained largely flat at £2.992bn for the first nine months of 2010 compared with $2.986bn in the same period last year.

However, in the third quarter alone, net written premiums were 12% higher than in the third quarter of 2009, at £1.05bn versus £937m.

Aviva’s UK combined operating ratio (COR) for the first nine months improved to 96% from the 98% reported in the first half of the year, which the company said reflected the profitability of the business it is writing and “some seasonality”.

The company said in its nine-month interim management statement that it sees “significant opportunity” for future earnings growth in personal and commercial lines through improved pricing, better customer retention and new marketing initiatives.

“In the commercial market we will exploit our leadership position in insurance for SMEs and, reflecting the controlled expansion of our risk appetite, build capability in the corporate risks and specialty lines sector,” the company said.

Group-wide, Aviva achieved a general insurance COR of 97% for the first none months of 2010, ahead of its ‘meet or beat’ target of 98%. It is now targeting a COR of 97% or better for 2011 as part of its strategic review.

Under the review, the firm also plans to achieve £200m of cost savings and £200m of efficiency gains by the end of 2012.

Following attempts by rival insurer RSA to buy Aviva’s general insurance business earlier in the year, the company has reiterated its view that its general and life businesses are better together.

“By virtue of the diversification of our risks across the group, under the current individual capital assessment regime, we can hold 30-40% less capital to write new general insurance business than the life and general insurance businesses would be required to hold on a stand alone basis,” the interim management statement said. “We anticipate that this benefit will be reinforced under Solvency II. Equally, the diversity of our business drives more resilient cash flows and earnings than monoline insurers through the cycle. There are clear synergies to having life and general insurance under one roof, including the operational benefits of shared back-office functions, IT and finance resource, and the opportunity to transfer skills and knowledge across the group.”