Results Q&A: Ageas UK chief exec Barry Smith

IT: What were the main drivers in Ageas UK’s return to profit?

BS: The single biggest change has been in private car. Ageas UK Limited (AIL)’s private car combined ratio of 95.4% is an improvement of 10 points over last year. Continuing with AIL, there has been plenty of movement on household profitability. Looking wider than AIL, there has been a growth in profit on retail, Tesco Underwriting has moved into profit, and there was an improvement in the underlying profitability of the Ageas Protect [life] business as well. In summary it is the combination of all of the businesses doing better.

IT: What role did investment income play in the result?

BS: It is principally all down to underwriting. The investment yield is absolutely minimal so the improvement on the non-life side is linked to improvements in the rating and risk-based pricing.

IT: How do you plan to maintain the performance?

BS: We wouldn’t by any stretch of the imagination expect to see anything like such significant growth but what we would expect to see further improvements in our organic growth in AIL. In part that will come from where we see our competitive strengths in car and household, but also where it makes sense to continue some expansion in commercial.

We also expect to see some organic growth in Tesco Underwriting and our retail business. 2012 is not just a year of consolidation, it is a year of capitalising on where we have now got to and continuing the relentless journey of growing our business profitably in the UK.

IT: You have gone from being a £1.2bn company to a £2bn company in revenue terms. Was Tesco Underwriting the main driver?

BS: Certainly a large proportion of the growth is from Tesco. Having said that the organic growth in AIL is way above the market norm. We have grown the core non-life business by over 15% year on year.

Our long term strategy has always been to understand how we grow our businesses progressively and at the same time make step changes where it makes sense to do so. Over the course of the last couple of years that includes Tesco Underwriting, the acquisitions of Kwik Fit Financial Services and Castle Cover and the entry into the Protect business.

IT: How do you account for the fact that your motor combined ratio is better than those being reported by your peers so far?

BS: For many years we have always had a significant difference between our result and the market result. That market differential we believe will still be maintained in 2011 and will be proved as our competitors announce their results. What it means for us is that we have a very profitable car portfolio so we will be looking to see how, where it makes sense, to  grow that business.