Ogden rate impacts LV= GIG 2019 results
LV= General Insurance Group reported a slightly deteriorated combined ratio and a dip in profits for 2019, which it attributed to adverse Ogden impact.
The group, which was purchased by Allianz in January, said that, taking this and other factors into account, including inflationary headwinds affecting its motor book, it had performed well.
Gross written premiums up 12 percent to £1.6 billion, compared to £1.4 billion in 2018, excluding the discontinued commercial business lines. The company achieved an operating profit of £93 million despite adverse Ogden impact of £13 million. This compares to £107 million in the previous year, which benefitted from a £35 million Ogden release. The company’s combined ratio was 94.9 percent, up 2.9 percent from 92 percent in 2018.
Steve Treloar, LV= General Insurance chief executive, said: “I’m pleased to say that our business performed well in 2019 and saw us achieve a robust profit and very strong underlying growth in revenue and customer numbers.
“We successfully delivered underlying premium growth of 12 percent, excluding discontinued business lines, to £1.57 billion. The number of customers we provide products and services to also increased across all product lines, growing by 10 percent to 5.7 million which is a significant achievement in what is one of the most competitive markets in the UK. Growth was driven by both distribution channels, with direct business premiums up by 7 percent as a result of the success of new products, including Multi Car and Home Plus.
“The broker business also delivered growth of 24 percent, excluding discontinued business lines, as a result of the successful migration of the personal lines business from Allianz which saw us broaden our distribution to 1400 brokers and double the number of products we offer across both car and home. A strong performance was also delivered in our specialist lines where we are now the number one insurer for motor homes, second largest for driving schools and third largest for motorbikes.”
Kevin Wenzel, LV= General Insurance chief financial officer, added: “In 2019, we maintained strong underwriting and pricing discipline as well as good cost control which resulted in us delivering a robust set of numbers. Claims inflation in motor continued to put pressure on profitability with significant increases in vehicle thefts and higher costs of vehicle parts due to increased technology in cars. This contributed to an overall level of claims inflation of around 6 percent. In response, our rates were increased to broadly maintain our current year motor loss ratio, and strong cost control improved our expense ratio by 0.4 percent to 21.7 percent.
“A new Ogden rate of -0.25 percent was announced which led to a £13 million strengthening of reserves in the year vs a £35 million release in 2018 when we had previously anticipated an Ogden rate of 0 percent. Putting this Ogden effect aside, the underlying COR improved by just over 1 percent to 93.8 percent.
“Our levy to the Motor Insurance Bureau also rose due to these underlying claims cost pressures but despite this and the levels of claims inflation, operating profit for the year was £93 million (FY 2018: £107 million).
“Investment returns at £32.6 million are significantly higher than last year (FY 2018: £8.3 million), with 2018 impacted by market movements on hedges protecting the Solvency II balance sheet.
“We are pleased with our financial performance given the one-off Ogden adjustment, significant inflationary headwinds affecting our motor book and general market uncertainty. To deliver profitable growth against this backdrop sets us up well for 2020 as we look to continue to grow both organically and through the addition of the L&G insurance business to our portfolio.”
