The Co-op confirms sale rumours as results worsen

The Co-operative Group has confirmed that it wants to sell its general insurance arm, as the division posted worsening results for the 2012 year.

The Co-operative Insurance managing director Mark Summerfield said the sale would let the group concentrate on its banking ambitions.

“As part of that, we need to rationalise our activities,” he said. “It is not without regret, because this is an enormously successful general insurance group we have had but, in order to succeed in our banking group strategy, we need to focus.”

Summerfield scotched rumours that private equity firm Tungsten was bidding for The Co-operative Insurance. He said: “There isn’t any preferred buyer at the moment. We’ve had a significant number of expressions of interest directly, but Tungsten wasn’t one of them.”

He added that The Co-operative Insurance was an attractive purchase partly because its brand was trusted, its home insurance book was performing well, and its telematics arm was strong.

But in its 2012 results, posted today, the firm’s combined operating ratio soared to 110.9% from 104.4% in 2011, while its profit before tax fell to £3m from £32.3m.

The Co-operative Insurance head of home insurance Lee Mooney said these shifts were both due to the strengthening of prior-year motor claims reserves.

“The reserve strengthening for prior year motor claims reserves is around £50m. So the underlying profit before tax without that would have been £53m, which is a pretty healthy result,” he said.

The insurance arm’s overall gross written premium fell to £555.7m in 2012, from £668.8m in 2011, mainly as the company took action to improve the quality of motor broker business written, including introducing credit scoring and restricting its underwriting footprint.