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Insurers have struggled in making profits? Here are some figures PRE-JACKSON reforms.

I wonder if they have slightly increased post-Jackson?

All the top five companies made big and growing profits in 2012

The five UK market leaders in motor insurance are: Direct Line, Admiral, Aviva, Liverpool Victoria and AXA. All five recently announced their results for 2012 - and all of them saw their profits rise.

Direct Line

Formerly a wholly-owned subsidiary of RBS, Direct Line listed on the London Stock Exchange (LSE) in October 2012 when 35% its issued share capital was sold by RBS for £911m. It now operates on a ‘substantially standalone basis’ from RBS. Its current market capitalisation is £3.08bn and it’s a constituent of the FTSE250. Direct Line’s main motor insurance brand is Churchill. It has ‘strategic partnerships’ for distribution with Nationwide, Sainsbury’s Bank and RBS Group and a presence on the four major UK price comparison websites.

Results for year ending 31 Dec, 2012 (announced on 28 Feb, 2013)

Group

2012 2011
Gross written premiums £3,991m £4,125m
Operating Profit £461m £422m
Motor insurance

Policies in force (thousands) 4,050 4,107
Gross written premiums £1,624m £1,735m
Operating profit £261.8m £254.8m
Gross written premiums fell because management has been ‘de-risking the book’. But Direct Line says its profitability has improved because:

It has been able to release reserves from previous years ‘driven by favourable bodily injury experience for recent accident years partly attributable to improved pricing, better risk selection and benefits arising from the Group’s claims transformation programme’.
‘Following these actions, inflation rates for small bodily injury continue to be favourable relative to actuarial expectations’.
Direct Line’s accounts show revenue of £64.2m from referrals to solicitors and vehicle recovery, repair and replacement services. (Thompsons does not accept referrals from or work for insurance companies.)

Direct Line will be paying its 2012 dividend to shareholder of 8 pence per share, representing 55% (£101.4m) of post-tax earnings of £184.3m, on 11 June, 2013.

The total dividend is equivalent to a premium reduction of £25 per customer.

Admiral

The UK’s second largest car insurer by vehicles covered, Admiral’s group vehicle count grew 6% in 2012 to 3.55m (2011: 3.36m), according to results announced on 8 March, 2013.

Founded 20 years ago, it focused exclusively on the car market until late last year when it launched a household insurance product. Listed on the LSE (since 2004) with a market capitalisation of £3.61bn, its group profits rose 15% in 2012 to £345m (2011: £299m).

Admiral’s UK car insurance profits increased 19% in 2012 and were actually higher than the group total above (due to the effect of losses in overseas markets).

UK Car Insurance

2010 2011 2012
Turnover £1,420m £1,966m £1,936m
Profit before tax £275.8m £313.6m £372.8m

Its annual report, released on 5 March 2013, said: “The UK car insurance market became substantially more price competitive in 2012 than it had been during 2010 and 2011, over which period Admiral grew its business significantly. Whilst the number of customers continued to grow, the rate of growth was slowed significantly as Admiral opted to preserve margin rather than chase growth. Total premium written in 2012 was broadly flat compared to 2011 at just over £1.7 billion, whilst the number of customers rose 2% year-on-year to 3.02 million at 31 December 2012.”

Admiral has increased its total dividend pay-out 20% to 90.6 pence per share (2011: 75.6p) or £245m (2011: £203m). The dividend is due to be paid on 24 May, 2013.

The total dividend is equivalent to a premium reduction of £81 per customer.

AVIVA

At the end of 2012, AVIVA had nearly 2.5 million UK motor insurance customers, an increase of more than 250,000 customers since the start of 2012, apparently because of the success of its Quotemehappy and Multicar products.

Its 2012 annual report does not give a separate turnover figure for car insurance but includes it under UK ‘general insurance’ (which also includes health and household insurance). Its UK general insurance net written premiums were £4,062m (2011: £4,110m). The report said: “We have grown in areas where good returns are available including personal motor, corporate and speciality risks and personal speciality lines, but have taken action to reduce exposure in unprofitable business segments, notably in some commercial lines.”

It continued: “Personal motor premiums increased by 3% to £1,164 million (2011 £1,126m) and we have nearly 2.5 million personal motor customers, an increase of over 250,000 since the start of 2012. We continue to deliver good profitability in personal (motor insurance) lines.”

AXA

AXA UK and Ireland is part of the vast AXA group, headquartered in France and listed on the Paris Bourse. It does not provide much information on its financial performance in the UK car market, but AXA UK & Ireland did issue a release on 21st February 2013 saying: “Motor profitability improved in 2012, thanks to pricing and risk selection actions in the Direct channel, most notably Swiftcover, which together reduced motor revenues by 11 per cent. The new management team in place in our Direct and Partnership business is already making its mark and will drive improved results in 2013 and beyond.”

Liverpool Victoria

LV operates in the car insurance market through a subsidiary called Highway Insurance Company Limited. HIC lags well behind the market leaders with £359m in insurance premium revenue in 2012. This is down on 2011 (£398m) but profits rose 11% to £29.5 (2011: £26.5m).

The company says it decided not to pursue ‘business volumes at the expense of margins’ because of UK motor market price competition.

It did not pay a dividend to its parent company, LV (which is a mutual). However, its board did award itself a 15% increase in overall remuneration (from £6.11m in 2011 to £7.03m in 2012). This included an increase for the chief executive of 20% from £2.18m to £2.62m.