Insurer set to pay out extra £75m on floods
Feb 7 2008 by Iain Laing, The Journal
NORWICH Union insurer Aviva has added another £75m to its estimate for claims stemming from last summer’s flooding crisis.
The group said the bill for adverse weather costs in 2007 now stood at £475m after its general insurance business came to the aid of 45,000 households and 6,000 businesses in June and July last year.
The update came as Aviva reported record levels of business in the UK, with life and pension new business sales up 5% to £11.6bn in 2007.
The weather-related claims have impacted on the group’s profitability, underlined by a deterioration in its combined operating ratio. The key industry measure highlights the amount of money paid out on claims and in costs for every £1 of premiums taken in.
Aviva said it expected its ratio to be around 100% in 2007, rather than the 95% it would have achieved if the exceptional weather had not occurred. Aviva set itself a target of 98% at the start of the year.
As well as the flooding in June and July, insurers also took a hit from storm-related damage in January of last year. Operating profits across the whole Aviva business fell 8% to £1.54bn in the first six months of 2007.
The group said in the summer it planned to raise home insurance premiums by an average of 10%, although this was not a blanket rise.
Chief executive Andrew Moss said the company’s broad portfolio of products meant it was confident about future trading. He added: “While our markets will be affected by the current economic uncertainty, I believe we will continue to grow both new business sales and profit in line with our stated targets.”
Aviva said its UK arm maintained its share of the life and pensions market at 11% in the first nine months of 2007, in line with its stated aim of growing at least in line with the rest of the sector.
Total pension sales were £4.38bn, with individual sales decreasing 10% as the impact of last year’s changes to pension rules start to taper off.
Bond sales were up 17% to £4.19bn, although Aviva said it expected the market to slow as potential changes to capital gains tax legislation created uncertainty around unit-linked bond sales.
