LV GI unit hails ‘excellent performance’ as profit doubles

LV’s general insurance (GI) business has more than doubled its operating profit in the first half of 2017, largely thanks to a lower level of motor claims.

The LV GI unit made an operating profit of £49m in the first half of 2017, up 123% on the £22m it made in last year’s first half.

The business shaved 4.9 percentage points from its combined operating ratio (COR) taking it to 93.6% (H1 2016: 98.5%).

LV GI H1 2017 results

The underwriting profit increased almost five-fold to £39m (H1 2016: £8m).

The big jump in underwriting performance came despite a £31m strengthening of the margin to cover claims uncertainty, although this was mostly offset by £23m of reserve releases.

The LV GI unit is in the process of merging with Allianz’s UK GI business, which is subject to regulatory approval and is not reflected in the first half results.

The improved underwriting performance was partly offset by lower investment returns.

Gross written premium grew 4% to £817m (H1 2016: £785m) as a 4% growth in motor offset a 6% fall in the smaller home business because of the insurer’s decision last year to pull out of brokered home business.

‘Excellent performance’

LV= described the first-half GI results as “an excellent performance.”

It said that the jump in underwriting performance was caused by “improved efficiency and productivity as well as underlying claims performance benefitting mainly from low claims frequency on the motor accounts in the current year.”

At group level, operating profit increased 58% to £82m (H1 2016 £52m).

Group chief executive Richard Rowney said: “I am particularly pleased that this strong performance is reflected across both of our trading businesses.

“In general insurance we have successfully managed the impact of the Ogden discount rate change and premiums are up 4% to £817 million (HY 2016: £785 million) and the combined operating ratio has improved to 93.6% (HY 2016: 98.5%) reflecting our improved efficiency and productivity in pricing and underwriting.”

The government proposed new legislation last week that, if enacted, will change the way the Ogden discount rate is set. The government estimated that the change could raise the rate to between 0% and 1% from its current level of -0.75%, where it was set in March this year.

LV has pledged to pass on 100% of savings it makes from the increase in the Ogden rate to customers.