LV= GI profit drops 31% amid ‘intense competition’

LV=’s general insurance operating profit fell 31% to £43m in the first half of 2013 from £62m in the same period last year.

The fall was mainly driven by a 37% drop in investment returns to £26m (H1 2012: £41m). LV= said the financial markets were highly volatile in the first half of the year, which meant it was not possible to repeat “the exceptional investments performance seen during the same period last year”.

However, underwriting profits also fell, declining 19% to £17m (H1 2012: £21m).

The combined operating ratio increased slightly to 97.6% (H1 2012: 97%) because of a rising expense ratio. This was because of lower motor rates pushing premium income down.

LV= general insurance managing director John O’Roarke said: “This is a solid performance against a backdrop of weakening motor rates, intense competition and low investment returns.

“The two core business areas, direct and broker, now underwrite 2.9 million and 1.4 million policies respectively. Both channels contributed to the operating profit at £23m and £20m respectively.”

Premium growth

LV=’s general insurance gross written premium (GWP) was almost flat at £748m (H1 2012: £747m).

Overall broker motor personal lines revenue was down by 10% to £222m, despite an increase in customer numbers, which LV= said reflects “materially lower” premium rates within the market.

However, the company is now the UK’s third-largest motor insurer with a market share of 11%.

The company also showed growth in certain parts of its business. Commercial lines GWP increased 18% to £94m, and SME GWP grew by 28% to £46m. Commercial motor GWP increased 10% to £48m.

Direct household also grew. The customer base rose 9% to 621,000 policies.

O’Roarke said: “I expect to see continued growth in SME and home in the second half of the year. This will help mitigate the impact of overly competitive conditions in the core motor business.

“I remain confident of delivering good returns for our members despite a relatively challenging outlook for the market as a whole in the short-term.”

LV= group chief executive Mike Rogers added: “Our general insurance business continues to perform well in a more difficult motor market.

“As a significant part of the success of LV= I look forward to releasing the full group results, due out 9 September, which will include the full results of the life business and group overall.”