Performance Ratio Benchmarking of the Top UK General Insurers 2007 - Market Research Reports

Contents:

Overview 1
Catalyst 1
Summary 1
2
Table of figures 3
Table of tables 4
Performance ratio benchmarking in UK accident & health insurance 5
The profitability of the top 10 accident and health insurers deteriorated in 2006 due to increases in loss ratios 5
The top 10 accident and health insurers recorded an average loss ratio of 63.7% in 2006, with the majority seeing an increase in their loss ratio 5
The average loss ratio of 63.7% in 2006 was a 3.5 percentage point increase from 2005 5
Standard Life combined a growing book of business with a smaller loss ratio 5
Combined Insurance Company of America was the only top 10 accident and health insurer to see a loss ratio reduction other than Standard Life 5
Five insurers saw loss ratios increase at the same time as their books grew 5
New Hampshire and BUPA saw loss ratios increase while their books declined in size 6
The top 10 accident and health insurers recorded an average expense ratio of 29.9% in 2006 8
Three of the top 10 accident and health insurers saw their expense ratios decrease while their books grew 8
Combined Insurance Company of America saw its book shrink and its expense ratios reduce 9
Norwich Union, SimplyHealth and AXA saw expense ratios increase as their books expanded 9
Two insurers saw their expense ratios increase alongside a shrinking book of business 9
The top 10 accident and health insurers recorded an average combined ratio of 93.6% in 2006, although two of the biggest players saw their ratios move above 100% 11
The top 10 accident and health insurers achieved an average combined ratio of 93.6% in 2006 11
Groupama and Standard Life both saw their combined ratios decrease in 2006 and their books grow, but Groupamas ratio remained above 100% 12
Combined Insurance Company of Americas loss ratio fell by 5.8 percentage points 12
Six of the top 10 insurers saw their combined ratios increase in 2006 12
Performance Ratio Benchmarking in UK liability insurance 15
The performance of the top 10 liability insurers was mixed in 2006 with some seeing better profits while a few players recorded significant losses 15
The average loss ratio of the top 10 UK liability insurers rose by 9.7 percentage points in 2006, but Norwich Union and QBE recorded large reductions 15
The average loss ratio for the top 10 liability insurers rose by 9.7 percentage points in 2006 15
Norwich Union and QBE saw the largest improvements in their loss ratios 15
Zurich saw the largest deterioration in its loss ratio in 2006 15
The average expense ratio of the top 10 liability insurers increased by 3.2 percentage points in 2006, with New Hampshire recording the largest increase 17
The average expense ratio rose by 3.2 percentage points in 2006 to 30.5% 17
New Hampshire recorded the largest increase in its expense ratio but remained one of the most efficient players 17
Royal & SunAlliance, AXA and Allianz were the least efficient UK liability insurers in 2006 18
The average combined ratio of the top 10 UK liability insurers increased in 2006, with Zurich and AXA seeing the two biggest increases 20
The average combined ratio increased in 2006 by 12.9 percentage points to 102.1% 20
Norwich Union and QBE bucked the trend and recorded improvements in their loss ratios 20
Six of the top 10 UK liability insurers recorded combined ratios below 100% in 2006 21
Four insurers recorded combined ratios in excess of 100% in 2006 21
Performance ratio benchmarking in UK motor insurance 24
The top 10 motor insurers made the move into profitability in 2006 on the back of reductions in losses and expenses 24
The average loss ratio among the top 10 UK motor insurance providers declined in 2006 with AXA, Norwich Union and Churchill recording the biggest improvements 24
In 2006, the average loss ratio of the top 10 UK motor insurers fell by 3.3 percentage points to 71.1% 24
AXA, Norwich Union and Churchill recorded the strongest loss ratio reductions 24
Four insurers recorded loss ratio deterioration 26
The average expense ratio of the top 10 UK motor insurers declined by 0.7 percentage points in 2006, with Churchill, AXA, NIG and Royal & SunAlliance recording above-average reductions 28
The average expense ratio of the top 10 UK motor insurers declined by 0.7 percentage points in 2006 28
Churchill, AXA, NIG and Royal & SunAlliance recorded above-average expense ratio decline 28
Norwich Union, Zurich and NFU Mutual recorded the highest increases in their expense ratios 29
The average combined ratio of the top 10 motor insurers fell by four percentage points in 2006, with AXA and Churchill seeing significant declines 31
The average combined ratio of the top 10 motor insurers declined by four percentage points in 2006 31
AXA and Churchill recorded significant reductions in combined ratio in 2006 32
NIG, Direct Line and Zurich recorded combined ratio increases 32
Performance ratio benchmarking in UK pecuniary loss insurance 35
The top 10 pecuniary loss insurers saw their profitability increase 35
Pecuniary loss combined ratios increased as expense ratios rose and loss ratios fell 35
The average loss ratio of the top 10 pecuniary loss insurers declined by 0.2 percentage points to 29.4% in 2006 35
Norwich Union and Lloyds TSB achieved strong loss ratio reductions 35
Direct Line and Pinnacle recorded the highest loss ratio increases 35
The average expense ratio of the top 10 pecuniary loss insurers increased to 65.3% in 2006, with Direct Line, Allianz and St Andrews seeing the highest individual increases 37
The average expense ratio of the top 10 pecuniary loss insurers increased by 1.8 percentage points to 65.3% in 2006 37
GEFI, Norwich Union and UK Insurance recorded double-digit increases in their expense ratios 37
Direct Line, Allianz and St Andrews achieved strong expense ratio reductions 38
Combined ratios increased among the leading pecuniary loss insurers in 2006 40
The average combined ratio among the top 10 pecuniary loss insurers rose by 1.6 percentage points in 2006 40
Allianz, Direct Line, St Andrews and Lloyds TSB reduced their pecuniary loss combined ratios 40
GEFI, UK Insurance and Pinnacle all experienced increases in their combined ratios 41
Performance ratio benchmarking in UK property insurance 44
Combined ratios rose for the top 10 property insurers in 2006 due to rising expenses and claims however most players remained in profitable territory 44
The average loss ratio of the top 10 property insurers increased by 0.1 percentage points in 2006, with Direct Line, Zurich and Norwich Union recording the biggest reductions 44
The average loss ratio of the top 10 property insurers increased by 0.1 percentage points 44
Norwich Union, Direct Line and Zurich recorded strong loss ratio reductions 44
St Andrews, NIG and Royal & SunAlliance recorded high loss ratio increases 44
The average expense ratio of the top 10 property insurers increased in 2006, with Norwich Union and AXA recording the largest individual increases 46
The average expense ratio of the top 10 property insurers rose by 1.4 percentage points in 2006 46
Norwich Union, AXA and Lloyds TSB saw their expense ratios increase, but they achieved GWP growth 46
Four of the top 10 property insurers achieved expense ratio reductions 47
The average combined ratio of the top 10 property insurers rose in 2006, with Norwich Union, AXA and NIG seeing the largest increases 49
Among the top 10 UK property insurers, the average combined ratio rose by 1.5 percentage points in 2006 49
Norwich Union, AXA and NIG recorded high combined ratio growth 49
Three insurers were able to defy the property market trend and reduce their combined ratios 50
Appendix 53
Definitions 53
Average 53
Weighted average 53
Earned premiums 53
Gross premium 53
Net premium 53
Written premiums 53
Loss ratio 53
Expense ratio 53
Combined ratio 53
Further reading 54
Ask the analyst 54
Our consulting 54
Disclaimer 54
List of Tables
Table 1: Change in premium income compared to change in loss ratio for the top 10 UK accident and health insurers, 2005-06 8
Table 2: Change in premium income compared to change in expense ratio for the top 10 UK accident and health insurers, 2005-06 11
Table 3: Change in premium income compared to change in combined ratio for the top 10 UK accident and health insurers, 2005-06 14
Table 4: Change in premium income compared to change in loss ratio for the top 10 UK liability insurers, 2005-06 17
Table 5: Change in premium income compared to change in expense ratio for the top 10 UK liability insurers, 2005-06 20
Table 6: Change in premium income compared to change in combined ratio for the top 10 UK liability insurers, 2005-06 23
Table 7: Change in premium income compared to change in loss ratio, top 10 UK motor insurers, 2005-6 28
Table 8: Change in premium income compared to change in expense ratio, top 10 UK motor insurers, 2005-6 31
Table 9: Change in premium income compared to change in combined ratio, top 10 UK motor insurers, 2005-6 34
Table 10: Change in premium income compared to change in loss ratio for the top 10 UK pecuniary loss insurers, 2005-06 37
Table 11: Change in premium income compared to change in expense ratio for the top 10 UK pecuniary loss insurers, 2005-06 40
Table 12: Premium income compared to change in combined ratio for the top 10 UK pecuniary loss insurers, 2005-06 43
Table 13: Premium income compared to change in loss ratio for the top 10 UK property insurers, 2005-06 46
Table 14: Change in premium income compared to change in expense ratio among the top 10 property insurers, 2005-06 49
Table 15: Change in premium income compared to change in combined ratio for the top 10 UK property insurers, 2005-06 52
List of Figures
Figure 1: Only two of the top 10 UK accident and health insurers achieved better loss ratios in 2006 7
Figure 2: Numerous UK accident and health insurers saw their expense ratios increase in 2006 10
Figure 3: Six of the top 10 UK accident and health insurers recorded higher combined ratios in 2006 13
Figure 4: Norwich Union achieved the biggest reduction in its liability loss ratio in 2006 16
Figure 5: New Hampshire saw the largest increase in its expense ratio in 2006 19
Figure 6: Most of the top 10 UK liability insurers saw their combined ratio deteriorate in 2006 22
Figure 7: While the average loss ratio of the top 10 UK motor insurers fell in 2006, NIG and Direct Line saw increases in their ratios 27
Figure 8: Norwich Union saw the biggest increase in private motor expense ratio in 2006 30
Figure 9: NIG saw the biggest increase in combined ratio in 2006 33
Figure 10: A number of UK pecuniary loss insurers recorded significant GWP decline in 2006, although some were also able to decrease their loss ratios as a result 36
Figure 11: Direct Line achieved strong GWP growth and reduced its expense ratio in 2006, although fellow RBS subsidiary UK Insurance did not fare as well 39
Figure 12: Allianz, Direct Line and St Andrews achieved the strongest pecuniary loss combined ratio reductions in 2006, largely through decreasing their expense ratios 42
Figure 13: Direct Line, Zurich and Norwich Union saw the best decreases in loss ratio in 2006 45
Figure 14: St Andrews was the only insurer to successfully reduce its expense ratio and at the same time increase its property insurance GWP in 2006 48
Figure 15: Direct Line and Churchill saw the biggest reductions in combined ratio in 2006 51