Aviva UK operating profit slips in 2022 as COR ticks up

The provider grew gross written premiums by 8% to £5.32bn, which was driven by double-digit growth in commercial lines and its retail channel attracting more customers.

UK commercial lines GWP was up 12% to £2.93bn due to a combination of strong retention, new business growth and a hard-rating environment. Within commercial, SME grew 13% supported by mid-market and digital-traded business.

UK personal lines GWP was up 2% to £2.39bn, “reflecting a good trading performance as we maintained pricing discipline in a soft-rating environment with high levels of inflation,” Aviva confirmed.

According to Aviva, despite significant inflationary headwinds, retail trading was up slightly supported by the launch of Aviva Zero.

Deterioration

The insurer detailed that the COR deteriorated because of lower motor frequency benefits, and the market-wide heightened claims inflation, which was partially offset by a strong commercial underwriting performance.

Aviva stated: “Commercial lines COR of 94.9% (2021: 94.6%) absorbed significant headwinds from inflation, which were largely offset by profitable new business growth and strong portfolio management across both SME and global corporate and specialty.”

The movement in the personal lines COR was worse at 97.3% (2021: 94.6%) due to adverse weather conditions and the return to a more normal claims frequency.

We have seen customers return to propositions such as travel insurance, following the Covid-19 pandemic, and there has been a strong adoption of Aviva Zero, with 100,000 policy sales achieved to date since launch.

Adam Winslow

The insurer added: “We continue to maintain pricing discipline in a soft market to deliver efficiency savings from ongoing simplification, which is driving lower expense ratio.

In the UK, we expect to see continued momentum in commercial lines while we focus on growing our retail business in personal lines.”

Weather-related problems have also been an issue for other insurers as Direct Line Group shocked the stock market with a profit warning in January and flagged £90m of claims costs across home and commercial business from the December 2022 freeze.

Allianz Holding posted an operating profit drop for 2022 as it was hit with £32m of claims costs also due last year’s cold snap.

Disciplined

Adam Winslow, CEO of Aviva UK & Ireland general insurance, stressed that the provider has remained disciplined in its approach to underwriting, setting an ambitious course to grow the business profitability, and invest in its digital capabilities.

Winslow added: “Against challenging market conditions, our team has worked decisively to meet the needs of customers and intermediaries.”

He commented that in personal lines the insurer has set a clear course to grow its retail business, maintaining a strong focus on price comparison sites and its direct business.

“We have seen customers return to propositions such as travel insurance, following the Covid-19 pandemic, and there has been a strong adoption of our sustainable motor proposition Aviva Zero, with 100,000 policy sales achieved to date since launch,” Winslow said.

“We have also established a leading position in the private clients market with the acquisition of the Azur Underwriting high-net-worth business.”

In commercial lines, he stated that the insurer continues to develop its propositions, including specialty lines, and to focus on its SME customer base, investing in automation and digital distribution.

Winslow said: “We launched one of the UK’s first standalone insurance products covering electric vehicle charging points.

“We refreshed our cyber proposition, added marine cargo to our digital platform and launched our own stand-alone policy wording for battery electric storage systems.”

Customer support

Winslow also detailed: “We launched QuoteMeHappy Connect to support young drivers, offering rewards for safer motoring, QMH Essentials for cost-conscious motorists, and signed a multiyear partnership with US insurtech Lemonade to help reach the underserved renters’ market in the UK.

“After opening to new business in 2021, we now insure more than 7,000 leaseholders (1,400 new customers) affected by external combustible cladding in residential blocks of flats through our standard residential property owners’ insurance.”

Group numbers

At group level, including Canada and Ireland, general insurance GWPs were up 8% to £9.7bn with a deteriorating COR of 94.6% (2021: 92.9%).

Across the business, including the life results, Aviva’s operating profit rose by one-third to £2.21bn.

We’ve delivered an overall impressive COR despite the impact of inflation and adverse weather in the UK. This demonstrated the benefits of the scale and diversification of our general insurance business in the UK, Ireland and Canada.

Amanda Blanc

Amanda Blanc, group CEO, said: “We’ve delivered an overall impressive combined operating ratio despite the impact of inflation and adverse weather in the UK. This demonstrated the benefits of the scale and diversification of our general insurance business in the UK, Ireland and Canada.”

The insurer stated that general insurance will remain focused on pricing appropriately for the inflationary environment.

Blanc concluded: “We have delivered a strong and financial performance quarter by quarter and, importantly, we have growth.

“Our plan is working and we have leading positions in all our core segments, high-performing businesses and, of course, the formidable brands.

We have full confidence in our medium-term targets. We are generating an attractive and growth-cash dividend, and we are aiming for regular and sustainable capital returns.”

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