Results Q&A: Zurich UK chief exec Stephen Lewis

IT: How would you describe the performance overall?

SL: “Overall operating profit is £159m, up by nearly 23% in local currency. As soon as you go above 20% in my book it is a pretty damn good result.

“That is really reflective of the actions we have been taking over the last 18 months or so. 2010 was very much about fixing the fundamentals. We restructured the business at the end of 2010 moving into 2011 around the three footprints of personal lines, commercial broker and our Zurich Municipal business. That  allowed us to bring a much more focused approach to market and those different customer groupings, and it also allowed us to really strengthen the overall performance and control environment around our businesses. The acid test is whether it shows in the numbers, which is obviously does.”

IT: Can you comment on the performance of personal lines specifically?

SL:  “Personal is showing the results of the actions we took in 2010, and that wasn’t just rate. Yes, we have taken rate like the rest of the market, but it was also about getting a lot of the capabilities repositioned, recognising what we have seen evolve in the personal lines market.

“That has been about making sure we put our underwriting capacity in the right places and sharpening our underwriting focus and capabilities at the front end. It has been about gearing up anti-fraud capabilities, be that application fraud at the front end right through to handling fraud at the back end with claims. It has also been about pushing price on the right businesses, recognising that we are still seeing an underlying trend of bodily injury claims that is driving claims inflation. There was no one silver bullet.

“We also set our stall out to the aggregator market, with a view to going live in December 2011. We did that – we went live on the first of four aggregators in December, which was Confused, and we envisage bringing on the other three aggregators as soon as practically possible as we go through 2012.”

IT: How did personal lines motor perform?

SL: “A damn sight better than 2010! While I’m not at liberty to give specific combined ratios, it was the right side of 100%. Having said that, against the backdrop of what we are seeing with continuing trends on bodily injury, we are still not back to where we need to be in the context of the profitability of the personal lines portfolio in the UK.”

IT: And commercial lines?

SL: “The market is still tough, there is still lots of capacity out there and it is difficult to carry the rate that is absolutely necessary at this point in the cycle. Having said that we did carry rate last year, but it is still not quite sufficient to offset claims inflation. Nonetheless our loss ratio year over year improved, and that’s just a reflection that beyond rate, we again brought underwriting discipline. We are very selective in how we put our capacity down and we continue to make those trade-offs between writing for volume versus writing for profit. That really has come through in terms of the core profitability of our commercial businesses.”