Covéa returns to profit in 2021

The underwriting result swung back to profit with a positive £6.8m result versus a £50.8m deficit in 2020.

The insurer’s return to the black came as gross written premium grew 16% year-on-year to £839.3m. Its combined operating ratio improved markedly from 109.6% in 2020 to 98.8% last year.

According to the insurer it delivered a “strong trading result” however it acknowledged that post the Covid-19 pandemic the 2021 results benefited “from the release of reserves held to cover claims which did not materialise”.

Offset

The breakdown of the figures showed that strong premium growth in home, commercial and pet insurance more than offset declines in personal lines motor and protection.

Personal lines motor dropped to £290.4m (2020: £294.1m) as the COR ticked up to 98.4% (2020: 97.1%). In a filing at Companies House, Covéa noted that in the soft market the number of policies actually grew by 16% for the year.

In home GWP jumped £32m to £165m a rise of 24%. This was due to “deepening relationships with existing brokers”, adding new relationships and expanding the proposition into mid-market and renters, Covéa listed.

The insurer though posted a £272,000 loss for the line as the COR remained above 100%. It came in at 100.2% compared to 101% in the prior year.

The claims benefits of people spending more time at home – such as lower claims from loss of water events or from theft – were offset by higher repair costs for material and labour, Covéa detailed as it also flagged a £4.9m hit from storm Arwen in 2021.

Commercial

In commercial lines, across a range of property, liability and motor insurance for SMEs, GWP grew by 33% to £316.4m. The provider reported that the growth was “supported by the strong market sentiment in light of our excellent servicing and trading capability throughout the 2020 Covid disruptions and our proactive and transparent response to business interruption claims”.

It also highlighted “leveraging our strong relationships with our brokers, partners and MGAs to ensure collegiate focus on sustainable profitable growth”.

Covéa stated it had been proactive in settling pandemic lockdown-related BI claims, particularly those impacting children’s nurseries, and only had a “relatively small” number and value of claims left.

The COR dropped significantly to 101.7% compared to 130.7% in the previous 12 months. The loss also tumbled from £49.8m to £3.5m across the two periods.

Reserves

The pet and protection unit achieved £67.5m of GWP (2020: £60.1m). The reserve releases helped reverse a £7m loss in 2020 with a £7.3m profit last year. The reserves had been made in 2020 in anticipation of a material uplift in unemployment claims as a result of the pandemic but the impact proved to be “significantly lower than predicted”. The COR improved accordingly from 117.3% to 80%.

While the protection business is largely in run-off, the pet business set up three years ago delivered a 124.8% increase in premiums in 2021, Covéa said. The company initially reinsured 100% of pet business but now takes an element of the risk in new arrangements.

Focus

In a statement CEO Adrian Furness, commented: “It’s pleasing to be able to announce that we delivered an increase in both written premium and profit in 2021.

“In the face of uncertainty around Covid, weather factors and higher than expected levels of inflation impacting our claims costs and supply chain management, we continued to respond positively and maintained our focus on delivering a great service for our customers, brokers and affinity partners, whilst delivering sustainable profitable growth for our business.

“In particular, the strong performance of our commercial operation and our growing partnership success across motor and pet, have created a broader, stronger business with the ability to offer customers greater choice and freedom.”

Concluding: “This fantastic progress reflects the skills, effort and enthusiasm of the great team of people we have at Covéa Insurance who have continued to support each other and our customers. I believe this positions us extremely well both to harness the opportunities and face the challenges we see ahead, as we continue to focus relentlessly on delivering for our customers.”

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