Co-op is optimistic despite falling profits in first half

The Co-operative Insurance is aiming to better its 2009 operating profit in the full year of 2010, despite recording lower first-half profits year on year.

The insurer made an operating profit of £11.7m in the first half of 2010, down 13% from the £13.6m it made in the first half of last year. Co-op’s director of general insurance David Neave put the relatively poor performance down to losses from adverse weather in the UK in January, which he said had affected both the household and motor books.

According to Neave, about two-thirds of The Co-operative Insurance’s book is motor, of which the majority is personal lines. He said he expected the company to benefit from the large rate increases the industry is putting through to counter rising bodily injury claims.

He said: “We are highly geared to that rate increase from both a growth and a profitability perspective.”

Neave said that the insurer’s motor rates for new business are 40% higher than they were in January 2009, which he described as “a particularly strong performance”.

The rate increases look set to continue for the rest of the year, according to Neave. “Some of the inflationary pressures on motor, slightly less so on home, have continued. Our expectation is that the market prices will continue to rise,” he said.

“Our intention is to track those market movements. As a consequence we would expect to see our earned income rising and we should benefit from that in profitability terms. Our firm expectation is that we will run out 2010 with an improved bottom line performance relative to 2009.”

Neave says The Co-operative Insurance is seeing particularly strong growth in the number of insured vehicles from its broker channel. “We remain comfortable with the additional business we have written there, not least given the prices that are coming through and the prices we forecast will continue to come through,” he said.

The Co-operative Insurance’s premiums earned in the first half of 2010 were 15% up on those reported for the same period in 2009, Neave said.

Unlike some companies with a heavy focus on motor business, The Co-operative Insurance had not had to boost prior-year reserves, Neave said. “Our reserving has shown a fairly solid performance but we still have to reflect the overall rising cost of claims in our rates,” he said.