Ageas slows commercial growth after 105.4% COR

Ageas UK posted a commercial combined operating ratio (COR) of 105.4% for the first nine months of 2012, despite a strong company-wide performance.

The nine-month 2012 commercial COR is a one percentage point improvement over the same period last year, but Ageas UK chief executive Barry Smith expressed his dissatisfaction with the number. He said: “It is still 105.4%. That would be a good example of a combined ratio that needs to improve. That is a reflection of the market in general being underpriced.”

Smith said the commercial competition keeping rates down was evident “across the board”.

As a result, Ageas’s commercial book gross written premium (GWP) grew only 3.8% to £120.2m in the first nine months of 2012 (9M 2011: £115.8m). By contrast, Ageas UK’s commercial GWP grew 30.9% in the first nine months of 2011, when compared with the same period in 2010.

Smith said commercial was “a good example of where we have said we have got to rein back on the growth. It is consistent with our approach of looking at how we can improve the quality of our earnings by taking action in areas where we don’t believe we are able to achieve the profits we should.”

Household dip

Another area Ageas UK is pulling back is household. The combined ratio in this line increased to 101.2% in the first nine months of 2012 from 100.3% in the same period last year.

Ageas revealed in this morning’s results that household GWP dropped by 9.7% to £209.2m (9M 2011: £231.6m).

However, Smith pointed out that the company was expanding where profitability prospects were better. Ageas Insurance’s motor GWP, which excludes Tesco Underwriting, was up 15% to £489.7m (9M 2011: £425.9m) as the company posted a comfortably profitable combined ratio of 94% (9M 2011: 96%) – far better than the 2011 industry average of 106%.

Overall performance

Despite continued underwriting losses in commercial, Ageas posted solid results overall for the first nine months of 2012. The company-wide combined ratio was 98.6% (9M 2011: 99.9%) and profit before tax and minority interests was £106.7m (£78.3m).

Improvement was even evident after payment of tax and shares of profits to minority shareholders. Profit after tax and minorities was £69.8m in the first nine months of 2012, up 29.7% on the £53.8m reported in the same period last year.

Groupama update

Ageas UK expects to complete its acquisition of Groupama UK in the fourth quarter of this year, once FSA approval has been received.

Smith said:  “We are quietly confident we will get that over the next couple of weeks. We are on track to complete as we said we would.”