Flood claims hit Lloyds TSB's results

Lloyds TSB Insurance today reported interim results for the six months to 30 June, 2007 characterised by two extreme weather events which have impacted performance.

The company said it continued to demonstrate “robust” sales growth, reporting a 10% increase in new business gross written premiums.

With the first phase of Lloyds TSB Insurance’s strategy now successfully completed and its claims re-engineering programme complete, the second half of 2007 will see work commence on phase two of the insurer’s strategy, it said.

The impact of weather related claims associated with January’s windstorm and the June flooding affecting Yorkshire and Humberside, is reflected in the profit before tax figure - down £55m to £59 m.

Claims arising from these events contributed to a rise in the claims ratio for all underwritten lines of business to 50% from 30% (2006), while the combined ratio increased to 96% up from 78% (2006), the company added.

Lloyds TSB Insurance said it had completed substantial changes to enhance its claims management capability and these have contributed to the containment of costs and to service delivery during the recent floods.

In addition to robust sales of home insurance, up 10%, through the UK Retail Bank, sales of SME insurance were also strong with 12% growth year on year.

Net operating income grew by £3m as growth in loan protection income was largely offset by the run-off from the legacy health portfolio.

The insurer said it continues to build its corporate partnership capability. Integration of the Pearl Group general insurance book of business was progressing well and business performance was in line with expectations.

In May, Lloyds TSB Insurance entered into partnership with D&D Homecare, jointly developing a Home insurance buildings and contents product specifically designed for the intermediated mortgage market.

The business has largely completed the strategy it announced in 2003 and is now developing and beginning to implement its strategy for the next 3 years:

? On its broked business, Lloyds TSB Insurance will bring in-house administration activity, starting with its home panel in Bournemouth

? The business will focus on five customer segments, developing bespoke offerings, tailored to each distinct segment

? The business plans to increase its aggregator activity, placing more of its branded products onto aggregators, working with its corporate partners in this arena

? Following good growth in SME insurance sales, the business will increase its scale in this area, including building broking capability in this market

? There are further opportunities to improve claims performance, particularly through fraud prevention and the identification and quality of recoveries.

Phil Loney, managing director of Lloyds TSB Insurance, said: “The country has witnessed some of the most extreme flooding in living memory at a time of year generally viewed by the industry as benign.

"Coupled with the January windstorm, the impact has been felt across the industry over the first six months of the year.

“With the addition of further flooding in July, the industry’s supply chain of loss adjusters, restoration companies and builders is exceeding its capacity. In this situation, insurers will have to work very hard giving their customers help and guidance.

“In the first half of this year, our financial performance, like other insurers, has been impacted by the extreme weather events in January and June.

"Nonetheless, an average annual profit growth rate of 17% (2003-2006), has put the business in a strong position and the new strategy will give us further opportunities to grow profitably over the next three years.”