Aviva UK sees COR deteriorate and operating profit slip

The insurer revealed that gross written premium grew by 5% to £2.63bn with the business flagging a positive performance in its commercial lines division.

UK commercial lines GWP was up 12% to £1.43bn “reflecting a favourable rating environment, high retention levels and strong new business growth, benefiting from our investment in underwriting talent and strong broker relationships”, Aviva said.

UK personal lines GWP fell by 1% to £1.2bn. The insurer detailed that retail premiums were stable with growth in household business partly offsetting a reduction in motor, as it maintained pricing discipline in a soft rating environment.

It also noted: “Intermediated premiums were 2% lower as we continue to reshape the portfolio towards more profitable segments.”

The business also detailed the reasons behind the movement in its COR which rose year-on-year from 93.9%.

Aviva detailed: “Commercial lines COR of 93.9% (HY21: 93.6%), was 0.3pp higher, as a result of weather, partly offset by improvements in underwriting performance in both small and medium-sized enterprise (SME) and Global Corporate and Specialty (GCS), as we continue to grow market share through profitable new business growth and high levels of retention, supported by strong rate momentum.”

The movement in the personal lines COR was more dramatic.

Aviva explained: “Personal lines COR of 97.1% (HY21: 94.2%), was 2.9pp higher owing to lower frequency benefits in motor lines and higher weather costs.

“We continue to maintain pricing discipline in a soft market to support underwriting performance and continue to deliver cost savings from ongoing simplification which is driving a lower expense ratio.”

Performance

Adam Winslow, UK CEO, told Insurance Age that the business was “very happy with performance given the challenging market conditions.

“The team has done a great job despite the storms and inflation.”

Winslow stated: “I’m confident we have the right focus to deliver on our ambitious plans for our GI customers and brokers, regardless of the tough market conditions that are expected to continue throughout 2022.

“We have maintained a disciplined underwriting approach to achieve profitable growth. GWP grew 5% year-on-year, with commercial lines continuing its track record of delivering double-digit growth at 12%, driven by strong client retention, rate and new business growth. We maintain market-leading broker sentiment and were rated number one across all 11 categories in the GlobalData 2022 UK Commercial Insurance Broker Survey.”

He added: “It demonstrates the value of our diversified portfolio.”

The business announced the completion of the acquisition of Azur, a HNW specialist, which Winslow detailed completes its HNW proposition following the addition of the Axa XL team.

Going forward the focus, for what Winslow described as a “market leading proposition”, will be organic growth but he admitted the business was never closed off to the possibility of M&A.

He remarked that COR for the UK business was “not a million miles away from where” the business expected it to be.

Personal

Looking to commercial he flagged a “very strong performance” but noted that personal lines was more challenging. He noted that the organisation had deliberately shrunk its personal lines business in motor but grown across home and travel.

Winslow continued: “In personal lines, we launched our competitively priced QuoteMeHappy Essentials product, as well as our sustainable proposition, Aviva Zero. Overall, retail customer numbers grew 6% with 93% of sales completed online.”

Continuing: “As the UK now faces into more extreme weather due to climate change, Aviva helped over 19,000 customers in the February storms and also provided emergency support to customers whose properties were recently affected by wildfires. We continue to support customers impacted by combustible cladding by taking a leading position in opening our standard residential property owners insurance to new business and are now covering 5,500 leaseholders.”

Winslow added: “I’m confident we have the right focus to deliver on our ambitious plans for our GI customers and brokers, regardless of the tough market conditions that are expected to continue throughout 2022.”

Group

At group level general insurance gross written premiums were up 6% to £4.69bn (H1 2021: £4.37bn) with a 94.0% COR(HY21: 91.6%).

Amanda Blanc, group CEO, said: “Sales are up, operating profit is higher, our financial position is stronger. This has been an excellent six months for Aviva.

“Our scale and diversification give us resilience and opportunity, enabling Aviva to withstand the challenging economic climate. Our market leading positions and our unique ability to look after a wide range of customers’ needs are clear advantages and have driven robust operating performance. Trading has been encouraging across all our major businesses in insurance, wealth and retirement.

“Even so, we are very conscious of the pressures currently facing many of our customers, especially the more vulnerable. In response we have launched new, low cost, insurance products, and we are increasing the range and amount of support we provide to communities, businesses and our own people during this challenging time.”

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