Insurance Age - NU's profits halve due to flood losses

Insurance Age - NU's profits halve due to flood losses: "NU's profits halve due to flood losses Norwich Union's general insurance and health profits for the first six months of 2007 have halved in the wake of recent flood losses to £284m (2006: £560m)

Net written premium was also reduced from £3.13bn in 2006 to £2.95bn according to results published this morning.

Overall parent Aviva reported - general insurance and health profit down 34% to £560m across the group and reiterated exceptional UK weather losses of £235m. Net written GI and health premium worldwide was down 4% to £5.5bn.

Despite the losses Aviva’s combined operating ratio at 97%, was ahead of ‘meet or beat’ commitment of 98% but way below last year’s 92%. The UK COR was 102%. RAC’s contribution of the UK result increased to £75m (2006: £46m.

In its statement Aviva said: “The result includes an adverse weather impact of £235m (2006: £125m benefit), with an estimated £175m arising from the June floods and £60m relating to the storms of 18 January. This impact has been mitigated by a benefit of £245m (2006: £140m) releases from the 2006 accident year and prior. We continue to apply our reserving policy consistently and our reserves remain at very strong levels.

Aviva continued: “The result has been achieved against a backdrop of challenging conditions across our core insurance markets. In personal motor we have achieved rate increases of 8% (2006: between 2% and 5% increase) and our focus on writing profitable business is reflected in a combined operating ratio of 103%, 2% better than the same period in 2006.

“Homeowner rates have increased by 5% (2006: 6% increase). Overall commercial rates have fallen by around 3% (2006: 3% decrease), although we are seeing increased market stability in commercial motor rates.”

Elsewhere Aviva said following the launch of a dedicated retention centre in Norwich Union Direct in November 2006 its customer ownership initiative is now live for all motor claims and provides a single point of contact for customers who experience a claim.

Additionally, it added it is working to develop closer ties with large commercial brokers. “The success of such initiatives is reflected in very strong retention rates across all classes of business and improving customer satisfaction scores. Our focus on cost control is reflected in the reduction in expense ratio from the 2006 full year figure of 13.9% to 13.6%, with our cost and efficiency programme, which is on track to deliver its anticipated benefits of £125 million from 2008, contributing to this improvement.

“The increase compared to the same period in 2006 reflects a combination of our investment in the business and pressure on volumes. We have seen an increase in our commission ratio to 24.3% (2006: 21.9%) driven by lower volumes of commission-free direct business and the impact of consolidators in our intermediary business.”

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