Significant scale change pleases Ageas chief ~ Finance Update

Barry Smith, chief executive of Ageas UK, has claimed the insurer is on track to break the 100% combined operating ratio (COR) barrier but warned again that he saw no real signs of commercial market hardening.

Speaking after the company delivered £882m in income for the first half of 2011 and profit before tax of £35.4m, he told Insurance Age: "I'm really pleased. What is encouraging is we see a significant change both in terms of the scale of the business and the profitability. That is probably a comment on all aspects of what we do."

Ageas Insurance reported a COR of 100.5% (H1 2010: 106.5%) but Mr Smith indicated he was confident of achieving a double digit figure soon.

"If you take the quarter two combined ratio it was 97.2%," he said. "The first half was influenced in part by the escape of water deterioration from 2010. Quarter two is very encouraging."

The private car ratio left him similarly upbeat. "Private car is important to us, the motor combined ratio was 96.9% to the half year. Those combined ratios say to us that significant progress has been made."

Bodily injury
He assigned the improvement to knowledge of the change in the profile of claims going back to bodily injury in 2009, remedial action with more sophisticated risk rating and the increase in market rates.

With motor now showing a relatively healthy COR he accepted that the first quarter had seen more rate increase than the second and anticipated the levelling out of rate increase would continue.

"Logically the evidence is there that shows that more rate across the market is needed ... there is probably still a need for rate increases but more akin to claims inflation," he said.

Mr Smith said that the 32.5% growth in commercial lines to £106.3m (H1 2010: £80.2m) was good but the insurer had a significant appetite to do more.

"Part of that is linked to increasing the brokers' awareness of what we already do and part is helping them see that we can help support their businesses and deliver to their customers," he argued.

More staff
He claimed the insurer had more broker facing staff than a year ago and that it looked to mix expertise with technological solutions for brokers.

He said: "At Ageas we should continue to invest to give the option to the broker whether that is a single solution where they are able to access a variety of markets and insurers or whether it is a bespoke electronic solution for them.

"It is not just electronic trading. It is how we stay in touch with the brokers and make decisions to help them and give them access to decision makers so they have confidence to place the risk that has been presented to ourselves."

However he added that it was very difficult to see any signs that brokers would be witnessing a hardening market in the near term.

"I think there may be some pockets in aspects like commercial vehicle, maybe in fleet but, from where we sit, it is difficult to see any real rate strengthening."

Tesco Bank
On the issue of the Tesco Bank Partnership he also stated an appetite to do more and add to the £311.2m of GWP achieved in the first six months

"We think we have the capability, capacity and skills to do a lot more," he said. "It is a lot more across the piece, whether it is linked to Tesco or the broker market it is important that we deliver on what we say we will do."