Aviva ends broker-friendly year with 12% profit uplift

Aviva UK boss Mark Hodges has in part credited the underwriting decisions of his predecessor, Igal Mayer, for the company’s UK general insurance result for 2010.

“We made some difficult decisions in 2008 and 2009. We shed some risks in those years that were not profitable and you see the benefit of that earning through in 2010,” he said of the firm’s ability to improve profitability and revenue.

He said increased motor rates in 2009 and 2010 had also started to improve results. Aviva’s UK general insurance operating profit – excluding health, Ireland, the Aviva Re captive business and agencies in run-off – improved by 12% to £476m from £424m in 2009. The combined ratio also improved to 96% from 99%, despite UK winter weather claims of £40m above Aviva’s long-term average.

The company estimates that without the weather losses, the combined ratio would have been closer to 95%. The underwriting improvement is not just the result of reserve releases. Current-year operating profit, which excludes prior-year releases, rose by £70m to £389m in 2010. And while not up to the heights of 2005 and 2006, net premiums written also improved, up 5% to £4bn.

Hodges said Aviva had managed to underwrite profitably without alienating brokers, praising the efforts of intermediary and partnerships director Janice Deakin to restore broker relations.Aviva fell from favour with brokers in 2009 after then UK chief executive Igal Mayer tried to cut commissions and boost premiums.

Brokers agree Aviva has improved its approach. “They have worked hard to understand the needs of key partners in a difficult trading market,” Jelf chief executive Alex Alway said.

Even Towergate, one of Aviva’s harshest critics in the Mayer years, believes the insurer has turned a corner. Towergate chief Andy Homer said: “Our relationship with them is pretty solid. It was the worst we had until Igal Mayer left.”

Some say Aviva’s new approach has made brokers more sympathetic to the insurer’s needs. “Brokers have responded to their call for sensible underwriting and strategic planning,” Brokerbility chairman Ashwin Mistry said.