What next for NFU Mutual?

What a year 2011 was for the National Farmers’ Union Mutual (NFUM).

In June we revealed how the specialist agricultural insurer’s profits had crashed 57% and underwriting loss slipped deeper into the red. Then three months later an Insurance Times investigation unearthed the struggles facing the company, such as internal wrangles and customers dissatisfied by increased premiums.

But today the company most known for insuring tractors and combined harvesters looks like it’s delivered a bumper crop. We reported this morning how NFUM has posted an underwriting profit of £105m in 2011, up from a £150m loss in the previous year.

This saw NFUM’s combined operating ratio swing to 91% from 115% – enough to put a rather large smile on the face of any chief executive and his shareholders. GWP grew 6% to £1.3m, but the company attributed a consolidated £47m loss after tax on unrealised equity portfolio losses.

Time for change – or caution?

These results put the insurer in a good position for growth – but how is boss Lindsay Sinclair planning to achieve this? NFUM’s general insurance products are sold through tied agents who traditionally act as many farmers’ sole point of contact. This strategy means it bypasses the UK broker market, of which there is a large agricultural contingent currently backed by ambitious underwriters including Rural Insurance.

So will NFUM go down the broker route? By opening up its distribution network to the broker market it will have access to new markets. However, after just returning to underwriting profitability, this could be a step too far, too soon. NFUM may choose to continue on a steady, sensible approach for now.