Performance Ratio Benchmarking of the Top UK General Insurers 2007

Table of Contents

• Overview
  • Catalyst
  • Summary
• Table of Contents
• Table of figures
• Table of tables
• Performance ratio benchmarking in UK accident & health insurance
  • The profitability of the top 10 accident and health insurers deteriorated in 2006 due to increases in loss ratios
    • 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
      • The average loss ratio of 63.7% in 2006 was a 3.5 percentage point increase from 2005
      • Standard Life combined a growing book of business with a smaller loss ratio
      • Combined Insurance Company of America was the only top 10 accident and health insurer to see a loss ratio reduction other than Standard Life
      • Five insurers saw loss ratios increase at the same time as their books grew
      • New Hampshire and BUPA saw loss ratios increase while their books declined in size
    • The top 10 accident and health insurers recorded an average expense ratio of 29.9% in 2006
      • Three of the top 10 accident and health insurers saw their expense ratios decrease while their books grew
      • Combined Insurance Company of America saw its book shrink and its expense ratios reduce
      • Norwich Union, SimplyHealth and AXA saw expense ratios increase as their books expanded
      • Two insurers saw their expense ratios increase alongside a shrinking book of business
    • 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%
      • The top 10 accident and health insurers achieved an average combined ratio of 93.6% in 2006
      • Groupama and Standard Life both saw their combined ratios decrease in 2006 and their books grow, but Groupama' s ratio remained above 100%
      • Combined Insurance Company of America' s loss ratio fell by 5.8 percentage points
      • Six of the top 10 insurers saw their combined ratios increase in 2006
• Performance Ratio Benchmarking in UK liability insurance
  • The performance of the top 10 liability insurers was mixed in 2006 with some seeing better profits while a few players recorded significant losses
    • 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
      • The average loss ratio for the top 10 liability insurers rose by 9.7 percentage points in 2006
      • Norwich Union and QBE saw the largest improvements in their loss ratios
      • Zurich saw the largest deterioration in its loss ratio in 2006
    • 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
      • The average expense ratio rose by 3.2 percentage points in 2006 to 30.5%
      • New Hampshire recorded the largest increase in its expense ratio but remained one of the most efficient players
      • Royal & SunAlliance, AXA and Allianz were the least efficient UK liability insurers in 2006
    • The average combined ratio of the top 10 UK liability insurers increased in 2006, with Zurich and AXA seeing the two biggest increases
      • The average combined ratio increased in 2006 by 12.9 percentage points to 102.1%
      • Norwich Union and QBE bucked the trend and recorded improvements in their loss ratios
      • Six of the top 10 UK liability insurers recorded combined ratios below 100% in 2006
      • Four insurers recorded combined ratios in excess of 100% in 2006
• Performance ratio benchmarking in UK motor insurance
  • The top 10 motor insurers made the move into profitability in 2006 on the back of reductions in losses and expenses
    • 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
      • In 2006, the average loss ratio of the top 10 UK motor insurers fell by 3.3 percentage points to 71.1%
      • AXA, Norwich Union and Churchill recorded the strongest loss ratio reductions
      • Four insurers recorded loss ratio deterioration
    • 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
      • The average expense ratio of the top 10 UK motor insurers declined by 0.7 percentage points in 2006
      • Churchill, AXA, NIG and Royal & SunAlliance recorded above-average expense ratio decline
      • Norwich Union, Zurich and NFU Mutual recorded the highest increases in their expense ratios
    • The average combined ratio of the top 10 motor insurers fell by four percentage points in 2006, with AXA and Churchill seeing significant declines
      • The average combined ratio of the top 10 motor insurers declined by four percentage points in 2006
      • AXA and Churchill recorded significant reductions in combined ratio in 2006
      • NIG, Direct Line and Zurich recorded combined ratio increases
• Performance ratio benchmarking in UK pecuniary loss insurance
  • The top 10 pecuniary loss insurers saw their profitability increase
    • Pecuniary loss combined ratios increased as expense ratios rose and loss ratios fell
      • The average loss ratio of the top 10 pecuniary loss insurers declined by 0.2 percentage points to 29.4% in 2006
      • Norwich Union and Lloyds TSB achieved strong loss ratio reductions
      • Direct Line and Pinnacle recorded the highest loss ratio increases
    • 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
      • The average expense ratio of the top 10 pecuniary loss insurers increased by 1.8 percentage points to 65.3% in 2006
      • GEFI, Norwich Union and UK Insurance recorded double-digit increases in their expense ratios
      • Direct Line, Allianz and St Andrew' s achieved strong expense ratio reductions
    • Combined ratios increased among the leading pecuniary loss insurers in 2006
      • The average combined ratio among the top 10 pecuniary loss insurers rose by 1.6 percentage points in 2006
      • Allianz, Direct Line, St Andrew' s and Lloyds TSB reduced their pecuniary loss combined ratios
      • GEFI, UK Insurance and Pinnacle all experienced increases in their combined ratios
• Performance ratio benchmarking in UK property insurance
  • Combined ratios rose for the top 10 property insurers in 2006 due to rising expenses and claims however most players remained in profitable territory
    • 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
      • The average loss ratio of the top 10 property insurers increased by 0.1 percentage points
      • Norwich Union, Direct Line and Zurich recorded strong loss ratio reductions
      • St Andrew' s, NIG and Royal & SunAlliance recorded high loss ratio increases
    • The average expense ratio of the top 10 property insurers increased in 2006, with Norwich Union and AXA recording the largest individual increases
      • The average expense ratio of the top 10 property insurers rose by 1.4 percentage points in 2006
      • Norwich Union, AXA and Lloyds TSB saw their expense ratios increase, but they achieved GWP growth
      • Four of the top 10 property insurers achieved expense ratio reductions
    • The average combined ratio of the top 10 property insurers rose in 2006, with Norwich Union, AXA and NIG seeing the largest increases
      • Among the top 10 UK property insurers, the average combined ratio rose by 1.5 percentage points in 2006
      • Norwich Union, AXA and NIG recorded high combined ratio growth
      • Three insurers were able to defy the property market trend and reduce their combined ratios
• Appendix
  • Definitions
    • Average
    • Weighted average
    • Earned premiums
    • Gross premium
    • Net premium
    • Written premiums
    • Loss ratio
    • Expense ratio
    • Combined ratio
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • 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
    • Table 2: Change in premium income compared to change in expense ratio for the top 10 UK accident and health insurers, 2005-06
    • Table 3: Change in premium income compared to change in combined ratio for the top 10 UK accident and health insurers, 2005-06
    • Table 4: Change in premium income compared to change in loss ratio for the top 10 UK liability insurers, 2005-06
    • Table 5: Change in premium income compared to change in expense ratio for the top 10 UK liability insurers, 2005-06
    • Table 6: Change in premium income compared to change in combined ratio for the top 10 UK liability insurers, 2005-06
    • Table 7: Change in premium income compared to change in loss ratio, top 10 UK motor insurers, 2005-6
    • Table 8: Change in premium income compared to change in expense ratio, top 10 UK motor insurers, 2005-6
    • Table 9: Change in premium income compared to change in combined ratio, top 10 UK motor insurers, 2005-6
    • Table 10: Change in premium income compared to change in loss ratio for the top 10 UK pecuniary loss insurers, 2005-06
    • Table 11: Change in premium income compared to change in expense ratio for the top 10 UK pecuniary loss insurers, 2005-06
    • Table 12: Premium income compared to change in combined ratio for the top 10 UK pecuniary loss insurers, 2005-06
    • Table 13: Premium income compared to change in loss ratio for the top 10 UK property insurers, 2005-06
    • Table 14: Change in premium income compared to change in expense ratio among the top 10 property insurers, 2005-06
    • Table 15: Change in premium income compared to change in combined ratio for the top 10 UK property insurers, 2005-06
  • List of Figures
    • Figure 1: Only two of the top 10 UK accident and health insurers achieved better loss ratios in 2006
    • Figure 2: Numerous UK accident and health insurers saw their expense ratios increase in 2006
    • Figure 3: Six of the top 10 UK accident and health insurers recorded higher combined ratios in 2006
    • Figure 4: Norwich Union achieved the biggest reduction in its liability loss ratio in 2006
    • Figure 5: New Hampshire saw the largest increase in its expense ratio in 2006
    • Figure 6: Most of the top 10 UK liability insurers saw their combined ratio deteriorate in 2006
    • 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
    • Figure 8: Norwich Union saw the biggest increase in private motor expense ratio in 2006
    • Figure 9: NIG saw the biggest increase in combined ratio in 2006
    • 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
    • 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
    • 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
    • Figure 13: Direct Line, Zurich and Norwich Union saw the best decreases in loss ratio in 2006
    • 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
    • Figure 15: Direct Line and Churchill saw the biggest reductions in combined ratio in 2006