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£613m
Operating profit before tax |
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| "Cost efficiency remains one of our key focuses" |
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General insurance
Our general insurance operations reported an excellent result, beating our COR target of 100% across the group.
Total operating profit increased significantly to £613 million
(2003: £387 million). The underwriting result was higher at
£105 million (2003: loss of £71 million) reflecting the actions we have taken to improve cost efficiency and lower claims expenses. We also benefited by £30 million in respect of better-than-expected weather claims experience in Europe, including the UK, and Canada. Investment returns were higher as a result of the investment income earned on the proceeds from our hybrid debt issue in September 2003 and a higher asset base.
The group COR of 97% (2003: 101%) reflected strong performances across all territories, particularly the UK, Ireland, the Netherlands and Canada. Our worldwide claims ratio* improved to 66.4% (2003: 69.9%) and our worldwide expense ratio was 10.8% (2003: 10.9%), with an improvement in the UK to 10.0% (2003: 10.5%). Worldwide net written premiums were £4.5 billion (2003: £4.3 billion).
The actions we have taken to improve efficiency and lower our cost base mean we remain confident that our results will be sustainable into the future.
UK
Norwich Union is the leading general insurer in the UK. Our aim is to achieve consistent and sustainable performance by focusing on high quality customer service, disciplined underwriting and cost control, along with the provision of innovative solutions to meet changing customer needs.
Our success is demonstrated by a 30% increase in operating profit to £408 million (2003: £313 million), with 7% growth in net premiums written to £2.7 billion (2003: £2.5 billion). Better-than-expected weather benefited the result by £20 million (2003: £30 million). We achieved an improved COR of 98%.
In personal lines we continue to achieve small rate increases, and these, allied with over £200 million of annual savings in claims costs through our supply chain management, have enabled us to sustain profitability. Although the level of competition in commercial lines has grown, our focus on the small business sector, together with rigorous underwriting, enable us to increase rates and retain our target business.
We have a multi-distribution strategy, with leading positions in the broker, corporate partner and direct markets. We have secured a five-year contract to provide household insurance products to HSBC customers. In February, we announced the closure of our Hill House Hammond (HHH) high street broking operation. The project is on track to convert over 550,000 customers to our direct operation, at a cost of £50 million. We have sold the HHH commercial business and we will complete the closure of HHH by the end of September 2004.
We deliver market-leading standards of service, with customer satisfaction scores well above industry benchmarks and continuing to improve. We have successfully developed our offshore operations, with over 2,200 jobs relocated to date. Service levels in our Indian centres have matched the improvements seen in the UK. Our scale and focus on cost reduction enables us to provide value for money to our customers and maintain levels of investment that will strengthen our market-leading position.
In March we launched our digital flood maps which will enable us to provide household cover to 230,000 customers who were previously uninsurable. We are piloting Pay As You DriveT motor insurance. In April we acquired OneSwoop, an online and telephone-based car sales business, which will offer a one-stop shop for motorists.
France
Our business in France focuses on personal and small business insurance. We achieved a COR of 100% and operating profit was £13 million (2003: £15 million). Net written premiums were
£304 million (2003: £305 million).
We are developing an electronically-enabled portal which will allow our tied-agents to transact more easily and improve efficiency. Around half of our agents have been connected so far and we expect the remainder to be connected by the end of September.
Ireland
Hibernian reported an increase in operating profit to £68 million (2003: £43 million) and a COR of 88% (2003: 97%). This performance was due to the positive rating environment in the previous year, better-than-expected weather claims experience which benefited the result by £3 million (2003: £7 million) and reduced claims frequency and costs.
In November we will extend our Penalty Points initiative to give a 10% premium discount to drivers with two or fewer penalty points on their licence and a 17.5% discount to those with no penalty points.
Netherlands
We continue to benefit from our focus on cost efficiency and our shared service centre.
In a market that is becoming increasingly competitive, net written premiums increased strongly to £341 million (2003: £295 million). Total premiums were boosted by increased sales from ABN AMRO as a result of converting the previously brokered business to our account. We achieved an excellent COR of 94% (2003: 98%) and a higher operating result of £23 million (2003: £12 million).
Other Europe
Our other European general insurance businesses reported operating profit of £18 million (2003: £16 million).
Canada
Operating profit from Aviva Canada, our second-largest general insurance operation, was £59 million (2003: loss of £33 million), with a COR of 99% (2003: 115%). This improved performance reflected the impact of rating increases in 2003, a lower 2004 claims frequency and better-than-expected weather claims experience, benefiting the result by £5 million. In addition, the result for the first half of 2003 included a non-recurring claims reserve strengthening in our Pilot business of £70 million.
Our new corporate partnership with Loblaws, Canada's leading grocer, continues to be rolled out. The agreement, to provide products under the supermarket's own President's Choice brand, is a first for the Canadian insurance market. |
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