While most major insurance firms announced their half year results during August (see
Insurance earnings: all in one place), mutual insurance, retirement and investment group LV= released its results this morning – and offered up something of a mixed bag.
On the positive side, the company announced that its general insurance unit enjoyed an 8% growth in premiums to £785 million – that’s up from £729 million during the first six months of 2015. However, that wasn’t enough to stop operating profits plunging from £70 million in the first half of 2015 to just £22 million in the first half of this year – representing a slump of 69%. Its underwriting profits also fell from £53 million to £8 million.
In its statement announcing the results, LV= highlighted that the previous year’s figures had a number of favourable advantages and this year’s performance was still solid overall.
“In the first half of 2015, the general insurance result benefited from a number of favourable one-offs that have not repeated this year,” its statement reads. “As we indicated at the time, the operating profit was boosted by exceptional levels of prior year reserve releases of £55 million compared to £13 million this year.
“In 2016, we are seeing motor claims inflation at the top end of our expectations driven by increases in technology in cars which makes repair costs more expensive. As a consequence of the combination of reduced investment income and higher claims inflation we expect to see the strengthening of motor rates continue in the second half of the year.”
The company also took a hit on a group level with group operating profits sliding from £79 million in the equivalent period last year to just £33 million this time around. This came despite an increase in net earned premiums (up from £1.1 billion to £1.2 billion) and a leap in life operating profits from £12 million to £28 million.
Speaking about the results, the company’s new chief executive Richard Rowney emphasised how LV= had earned the accolade of most trusted insurer for the second successive year and that there were extenuating circumstances when comparing the year on year results.
“In the first half of the year we have delivered increased sales in both our general insurance and life and pensions businesses,” he said. “The Group operating profit of £33 million reflects lower operating profits in the general insurance business and a £19 million loss in the heritage business mainly driven by claims experience variances, offset by an increase in life operating profit.
“The underlying trading performance of our general insurance business is good with 8% growth in premium income. Profitability in 2016 has been affected by the non-recurrence of a number of one-off factors that arose in 2015. The rating environment in general insurance remains mixed with rate increases in motor and a continuation of the soft market conditions in home. I am confident that our experienced and accomplished leadership team under Steve Treloar will continue to reinforce the position of our general insurance business as a market leader.”
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