Co-op GI H1 profit rises 9% in tough conditions

Co-op’s up-for-sale general insurance unit made an operating profit before tax of £28.8m in the first half of 2013, up 9% on the £26.5m it made in the same period last year.

The division’s combined operating ratio improved by 2.2 percentage points to 96.2% (H1 2012: 98.4%).

The improvement comes despite falling rates in UK personal lines motor and the impact of the EU Gender Directive, which came into force in December 2012.

However, the improved profitability came at the expense of premium growth. Co-op cut back its general insurance gross written premiums by 15% to £243m (H1 2012: £284.5m).

The first-half 2013 results compare favourably to the full-year 2012 results, when Co-op’s general insurance business made a profit of just £3m and reported a loss-making COR of 110.9%.

The company said in a statement: “The Co-operative Insurance has delivered an improvement against the year end performance, as we benefit from management actions taken to strengthen our underwriting approach, particularly in the motor portfolio.

“Despite challenging market conditions, with falling motor premiums and the impact of the Gender Directive on pricing, the business has provided a strong performance.

“The home insurance business has again delivered a strong underwriting performance and retention rates have remained high across own brand channels.”

The future ownership of Co-op’s GI business is still in doubt. Co-op is selling the unit to help shore up its ailing banking division.

However, its fate could soon be decided. Sky News reported on Monday that former RSA chief executive Andy Haste is teaming up with private equity firm Advent to buy the business.

The Co-op Group as a whole made a first-half loss of £559m after writing off £496m of bad loans at Co-op Bank.

The Prudential Regulation Authority said the loss does not affect its estimate that Co-op Bank has a capital shortfall of £1.5bn.

A Bank of England spokesman said: “The Prudential Regulation Authority (PRA) anticipated the likely scale and source of these losses when it made its assessment of the bank’s capital position in June. Consequently, the announcement today does not affect the PRA’s assessment that the Co-operative Bank has a capital shortfall of £1.5bn relative to 7% core equity capital after adjustments.”