Key Challenges and Issues Facing the Performance Ratio Benchmarking of the Top UK General Insurers 2007

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Performance Ratio Benchmarking of the Top UK General Insurers 2007

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Performance Ratio Benchmarking of the Top UK General Insurers 2007 provides the reader with an in-depth analysis of the performance ratios of the top 10 UK insurers across five major lines of business: accident and health, liability, motor, pecuniary loss and property insurance.

Data on 2006 loss, expense and combined ratios for the leading UK insurers. Insight into the underwriting efficiency of the top 10 UK insurers. Information on premium income changes for leading UK insurers in 2005 and 2006.

The profitability of the top 10 accident and health insurers deteriorated in 2006 due to increases in loss ratios

Combined ratios rose for the top 10 property insurers in 2006 due to rising expenses and claims however most players remained in profitable territory.

Understand changes in average performance ratios. Benchmark your performance ratios against those of major competitors. Identify which insurers became more or less profitable in 2006.

Overview 1

Catalyst 1

Summary 1

Table of Contents 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 Groupama’s ratio remained above 100% 12

Combined Insurance Company of America’s 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 Andrew’s 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 Andrew’s 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 Andrew’s 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 Andrew’s, 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

Datamonitor 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 Andrew’s 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 Andrew’s 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

Companies involved in the industry :

Fortis , Inc., Aviva plc, Royal & SunAlliance, Lloyds TSB, Norwich Union, BUPA, International SOS Ltd, American Specialty Health Networks , Inc., Foresters, Skandia, Munich Re AG, Direct Line, Hiscox Ltd, Alexander Forbes Limited, Friends Provident plc, ACE Limited, AXA, Atradius N.V, Legal & General Limited, RAC plc, Endsleigh, Brit Insurance Limited, Euler Hermes, Swiss Life, TT Club, Jardine Lloyd Thompson Group plc, Co-operative Insurance Society Ltd, HSA, Royal London Asset Management Limited, Superquote.com Ltd, Halifax plc, Goodhealth Worldwide Limited, FirstAssist, Legal & General Group Plc, CNA Insurance Company Limited, Insurancewide, QBE Insurance Limited, Churchill Insurance Company Limited, Clerical Medical, Scottish Widows, QBE, CPP Group Plc, Denplan Limited, DriveTech plc, Aspen Insurance Holdings Limited, General Insurance Standards Council, The Pension Protection Fund, BECTU, Scottish Life, Gerling, Coface UK Services Limited, Beazley Insurance Company, The Standard Life Assurance Company, Esure, Adrian Flux, Brit Insurance Holdings PLC, Hoot Car Insurance Services, William Russell Limited, Miller Insurance Services Limited, Medibroker Limited, Equitable Life, Gissings Ltd, Swiss Reinsurance Company, FP Marine Risks Limited, InsureandGo Ltd, Lloyds TSB Insurance, Domestic & General, Europ Assistance Limited, EMB Consultancy LLP, PYV Ltd, Pinnacle Insurance plc, AEGON UK plc, PIMS-SCA Ltd, Coversure Insurance Services Ltd, NIG, Paymentshield Limited, Saga Services Ltd, Intasure, GoSure Limited, InHealth Group, Oval Limited, Co-operative Financial Services Limited, The Beckett Group, Hastings Direct, HealthSure Group Limited, Allianz Cornhill Insurance plc, National Britannia Group Ltd, Sedgwick Group plc, Malayan Insurance Company Ltd, Everest Re Group , Ltd., Hannover Re Ltd, Benfield Group Limited, Columbus Direct, Friends Provident Life and Pensions Limited, UIA Limited, Lancaster Insurance Services Limited, Towergate Underwriting Group Limited, Scottish Equitable plc, The Medical Defence Union Ltd, Zurich International Life Limited

To order that report:

www.reportlinker.com/p074896/PRBWS-Performance-Ratio-Benchmarking -of-the-Top-UK-General-Insurers-2007.html

For more information, contact Nicolas by email [email protected] , or by phone +33 4 37 65 17 03.

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