Weekly briefing: 19-25 August - The good, the bad and the ugly

Further detail emerged this week about Bury broker Clive Hesketh. Insurance Times revealed last month that Hesketh, who headed up Lakeland Technologies, trading as Pinnacle Insurance Services, was arrest for issuing fraudulent professional indemnity polices. The broker has now pleaded guilty to 11 counts of false representation at Bury magistrates court. It emerged that he fleeced more than £90,000 from businesses. The broker market will be keeping a close eye on the sentence due to be handed down on Hesketh in September.

Insights into broking

In our Inside Broking section this week, we focused on two evolving topics. Agriculture insurance has been in the headlines recently as insurers and brokers alike seek to increase their foothold in the niche sector. We took an in-depth look at what makes this market for farmers attractive and where it is heading.

The referral fee debate is still too big to be ignored. Attention has focused on insurers ever since Jack Straw began his crusade for a complete ban on the payments. But what about brokers? The fees are a regular source of income for many brokers and could mean them having to look elsewhere. As one analyst states: “Banning or even reducing referral fees would be particularly negative for brokers.”

In our blogs section, we also feature the thoughts of InterResolve chief executive Peter Ashdown-Barr, who sends a message to the government giving his backing for a ban on referral fees but with a few notes of caution.

Read also the latest blog from Keychoice boss Jonathan Davey.

What’s left on Ageas’s to-do list?

One company that enjoyed a marked improvement in underwriting results is Ageas UK, which has brought its group combined ratio very close to the 100% breakeven mark and cut its motor combined ratio by 12.1 points.

Still, chief executive Barry Smith is not resting on his laurels, noting there is still a long way to go to achieve his objectives for the full year. Items still on Smith’s to-do list include the conclusion of the transfer of Tesco Underwriting, the continued expansion of distribution and completing integration of Castle Cover and Kwik-Fit into its retail broking operations.

Admiral investors not amused

Despite posting a 29% increase in net profit, Admiral’s share price has taken a beating, dropping almost 12% yesterday and following it up with a further 6% in trading so far today.

The company’s disclosure that referral fees only make up 5.6% of profits have done little to appease investors, who appear to have reacted badly to the company’s sharp drop in reserve releases, which cut underwriting profits at a time when other insurers are improving theirs.

IAG disappointment

There is little to celebrate for Ian Foy and his team at IAG UK, which turned in a A$181m (£115m) loss for the year to 30 June 2011 and a combined ratio of 135.6% as a result of rising bodily injury claims inflation. While this is a second year of big losses for the division, it is worth noting that the loss is almost 50% smaller than the $355m loss it made the previous financial year, and the combined ratio is 31 points better. This indicates that the remedial work is starting to take effect.

However, it remains to be see how tolerant shareholders will be of IAG’s English patient. Group chief executive Mike Wilkins has promised them a significant improvement in UK performance for the 2011/2012 financial year. He forecast a result “towards breakeven” for the full year despite a further loss for the first half of it (in other words, the last half of the 2011 calendar year). If there are further disappointments, Wilkins is likely to face calls to sell the division.