Aviva eyes broader corporate and specialty risk appetite

Aviva wants to further grow its corporate and specialty business in UK GI after reporting booming growth in the sector.

Aviva’s half-year result in UK GI showed 1% shrinkage in its larger personal lines account to £1.23bn of premium, while commercial lines had impressive growth of 7%, taking it to £929m in written premium.

Colm Holmes, recently appointed as chief executive of Aviva’s GI unit following it’s break from Life, revealed the corporate and specialty business had led the way with 9% growth, while the SME business grew 6%. Corporate and specialty also grew by 9% last year, and Holmes said he expected this growth to continue throughout the rest of this year.

“This is not growth at the expense of profitability,” he said. “And that’s been driven by the fact this growth is coming from property and liability classes, rather than motor classes, which are thinner margins.”

New risks

Several insurers have sought to exit or reduce coverage in liability classes, as the market has hardened in the UK.

But Holmes said Aviva wouldn’t be exiting this or any line.

“Our approach in the corporate space, particularly in the medium and large, and into public arena, is to underwrite the customer,” he said.

“Our goal is to underwrite a number of risk classes for each customer. We don’t focus on a class-by-class underwriting performance.

“Public liability is a part of our underwriting discipline, and if I look at financial lines within our corporate and specialty business it’s one of our fastest growing businesses that we have, albeit Aviva is coming at that from a smaller starting point.”

He added that the profitability the business was seeing meant the insurer would instead look to broaden its appetite.

“We’ve had very impressive growth and very impressive profitability. We’re seeing profit increasing faster than top-line growth,” he said.

“If anything, with our corporate and specialty business we’ll be looking to add additional risk classes rather than exit any risk classes.”

Broader broker relationships

UK GI’s head of intermediaries, Phil Bayles, said motor is usually the easiest place to grow commercial lines. The fact that most growth this year had come outside of motor, he said was particularly pleasing.

He said the success of the corporate business had subsequently seen Aviva working with more of the larger brokers.

Bayles said: “We’re really nicely balanced across the range of our distribution.

“We are growing well in the independent regional broker space, which is a stronghold for us, but we are also growing with larger brokers as well, particularly with the international brokers on the back of our global and corporate business.”

With the integration of the digital business into UK GI, Holmes said service for brokers would see further improvements.

“One of our key priorities is digitising that broker channel,” Holmes said. “We’ve invested significantly in our digital capability over the last number of years, and what we are now looking to do is bring that capability into the heart of our business.”

Personal lines

But while commercial lines business reported a healthy combined operating ratio of 93.4%, alongside 7% growth, the personal lines account endured a more difficult time.

The COR deteriorated to 97.3% from 95.2%, and that was not including the £45m costs Aviva will have in increased reserving as a result of the Ogden change.

However, the personal lines result does include all of the £34m costs linked to integrating the digital business with Aviva GI. Without this the COR would have improved to 94.5%.

“Personal lines has been a choppier market where we’ve had a number of headwinds associated with Ogden and inflation within that market,” Holmes said. “We’ve retained our discipline and while the COR has deteriorated somewhat in that business it’s still very impressive on a like-for-like basis and that is through disciplined underwriting.

“We want to have sustainable, profitable growth, but we always prioritise underwriting profit over growth and that will continue to be our focus.”

Commercial lines now makes up 43% of Aviva’s UK book, compared to 41% at the mid-point of 2018. As of the end of 2017, commercial lines made up 39% of the UK book.