Competition in UK Personal General Insurance 2007

DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Introduction 2
2007 saw a number of mergers and acquisitions and job losses 2
AXA acquired Swiftcover in February 2007 2
Norwich Union and HSBC announced plans to create a joint venture in May 2007 2
Kwik-Fit launched The Green Insurance Company in August 2007 2
Groupama acquired a majority stake in Lark Group in August 2007 3
HBOS decided to merge Esure and First Alternative's motor businesses in August 2007 3
Tesco launched its own price comparison website in September 2007 3
The AA and Saga merged in 2007 3
Equity Insurance Group recorded a high number of small-scale acquisitions 4
A number of insurers announced job cuts in 2007 to make cost savings 4
The top 10 UK personal lines insurers showed mixed results in performance in 2006 4
Norwich Union's personal lines book contracted slightly during 2006 4
Direct Line was the only personal lines RBSI subsidiary to achieve growth in 2006 5
Direct Line saw its personal lines book increase by 0.9% in 2006 5
UKI saw GWP for its personal lines business fall by 1.3% in 2006 5
Churchill saw the largest decrease in personal lines GWP of all the RBSI subsidiaries 6
AXA recorded strong growth across all its personal lines businesses in 2006 6
Royal & SunAlliance's private motor book grew in 2006, but other personal lines did not fare well 6
St Andrews's personal lines business grew as it recorded a large increase in household GWP in 2006 7
Zurich recorded GWP decline in all of its personal lines during 2006 7
BUPA witnessed a decline in its personal lines business during 2006 8
Fortis recorded strong GWP growth in the UK personal lines insurance market in 2006 8
Several of the leading UK personal insurers did not underwrite any commercial business in 2006 10
The profitability of the top 10 accident and health insurers deteriorated in 2006 due to increases in loss ratios 12
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 12
The average loss ratio of 63.7% in 2006 was a 3.5 percentage point increase from 2005 12
Standard Life combined a growing book of business with a smaller loss ratio 12
Combined Insurance Company of America was the only top 10 accident and health insurer to see a loss ratio reduction other than Standard Life 12
Five insurers saw loss ratios increase at the same time as their books grew 12
New Hampshire and BUPA saw loss ratios increase, while their books declined in size 13
The top 10 accident and health insurers recorded an average expense ratio of 29.9% in 2006 15
Three of the top 10 accident and health insurers saw their expense ratios decrease while their books grew 15
Combined Insurance Company of America saw its book shrink and its expense ratios reduce 16
Norwich Union, SimplyHealth and AXA saw expense ratios increase as their books expanded 16
Two insurers saw their expense ratios increase alongside a shrinking book of business 16
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% 18
The top 10 accident and health insurers achieved an average combined ratio of 93.6% in 2006 18
Groupama and Standard Life both saw their combined ratios decrease in 2006 and their books grow, but Groupama's ratio remained above 100% 19
Combined Insurance Company of America's loss ratio fell by 5.8 percentage points 19
Six of the top 10 insurers saw their combined ratios increase in 2006 19
The top 10 motor insurers made the move into profitability in 2006 on the back of reductions in losses and expenses 21
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 21
In 2006, the average loss ratio of the top 10 UK motor insurers fell by 3.3 percentage points to 71.1% 21
AXA, Norwich Union and Churchill recorded the strongest loss ratio reductions 21
Four insurers recorded loss ratio deterioration 23
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 25
The average expense ratio of the top 10 UK motor insurers declined by 0.7 percentage points in 2006 25
Churchill, AXA, NIG and Royal & SunAlliance recorded above-average expense ratio decline 25
Norwich Union, Zurich and NFU Mutual recorded the highest increases in their expense ratios 26
The average combined ratio of the top 10 motor insurers fell by four percentage points in 2006, with AXA and Churchill seeing significant declines 28
The average combined ratio of the top 10 motor insurers declined by four percentage points in 2006 28
AXA and Churchill recorded significant reductions in combined ratio in 2006 29
NIG, Direct Line and Zurich recorded combined ratio increases 29
The top 10 pecuniary loss insurers saw their profitability increase 31
Pecuniary loss combined ratios increased as expense ratios rose and loss ratios fell 31
The average loss ratio of the top 10 pecuniary loss insurers declined by 0.2 percentage points to 29.4% in 2006 31
Norwich Union and Lloyds TSB achieved strong loss ratio reductions 31
Direct Line and Pinnacle recorded the highest loss ratio increases 32
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 34
The average expense ratio of the top 10 pecuniary loss insurers increased by 1.8 percentage points to 65.3% in 2006 34
GEFI, Norwich Union and UK Insurance recorded double-digit increases in their expense ratios 34
Direct Line, Allianz and St Andrew's achieved strong expense ratio reductions 35
Combined ratios increased among the leading pecuniary loss insurers in 2006 37
The average combined ratio among the top 10 pecuniary loss insurers rose by 1.6 percentage points in 2006 37
Allianz, Direct Line, St Andrew's and Lloyds TSB reduced their pecuniary loss combined ratios 37
GEFI, UK Insurance and Pinnacle all experienced increases in their combined ratios 38
Combined ratios rose for the top 10 property insurers in 2006 due to rising expenses and claims however most players remained in profitable territory 40
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 40
The average loss ratio of the top 10 property insurers increased by 0.1 percentage points 40
Norwich Union, Direct Line and Zurich recorded strong loss ratio reductions 40
St Andrew's, NIG and Royal & SunAlliance recorded high loss ratio increases 41
The average expense ratio of the top 10 property insurers increased in 2006, with Norwich Union and AXA recording the largest individual increases 43
The average expense ratio of the top 10 property insurers rose by 1.4 percentage points in 2006 43
Norwich Union, AXA and Lloyds TSB saw their expense ratios increase, but they achieved GWP growth 43
Four of the top 10 property insurers achieved expense ratio reductions 44
The average combined ratio of the top 10 property insurers rose in 2006, with Norwich Union, AXA and NIG seeing the largest increases 46
Among the top 10 UK property insurers, the average combined ratio rose by 1.5 percentage points in 2006 46
Norwich Union, AXA and NIG recorded high combined ratio growth 46
Three insurers were able to defy the property market trend and reduce their combined ratios 47
APPENDIX 50
2005-6 definitions for lines of business 50
Accident & health 50
Medical expenses 50
HealthCare cash plan 50
Travel 50
Personal accident or sickness 50
Motor 50
Total private motor 50
Total commercial motor 51
Private motor comprehensive 51
Private motor non-comprehensive 51
Motorcycle 51
Fleets 52
Commercial vehicles (non-fleet) 52
Property 52
Total commercial property 52
Household and domestic all risks. 53
Consequential loss (i.e. business interruption) 53
Financial/Pecuniary loss business 53
Total personal financial loss business 53
Total commercial financial loss business 53
Legal expenses 53
Fidelity and contract guarantee 54
Liability business 54
Employers liability (including the employers liability part of mixed liability packages but excluding mixed commercial packages) 54
Professional indemnity (including directors' and officers' liability and errors and omissions liability) 54
Public and products liability 54
Mixed commercial package 54
Total personal 55
Total commercial 55
Pre-2005 definitions for lines of business 55
Accident and health 55
Individual accident and health 55
Group accident and health 56
General liability 56
Motor 57
Pecuniary loss 57
Total pecuniary loss figures 57
Property 58
Premium income measures 59
Earned premiums 59
Gross Premium 59
Net Premium 59
Written premiums 59
2005 FSA Return changes 59
Major changes in FSA Return categories and their impact 59
Market size 60
Changes in market size information 60
Market size methodology 60
Lloyd's players and underwriting result figures 60
Competitor data 61
GWP versus GEP reporting 61
Total personal and total commercial business 63
Home-Foreign, overseas and facultative reinsurance business 63
Further reading 63
Ask the analyst 63
Datamonitor consulting 64
Disclaimer 64
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Table 1: Top 10 personal insurance competitors by GWP and market share, 2006 10
Table 2: Split between personal and commercial business for the top 10 personal insurers, 2006 11
Table 3: Change in premium income compared to change in loss ratio for the top 10 UK accident and health insurers, 2005-06 15
Table 4: Change in premium income compared to change in expense ratio for the top 10 UK accident and health insurers, 2005-06 18
Table 5: Change in premium income compared to change in combined ratio for the top 10 UK accident and health insurers, 2005-06 21
Table 6: Change in premium income compared to change in loss ratio, top 10 UK motor insurers, 2005-6 25
Table 7: Change in premium income compared to change in expense ratio, top 10 UK motor insurers, 2005-6 28
Table 8: Change in premium income compared to change in combined ratio, top 10 UK motor insurers, 2005-6 31
Table 9: Change in premium income compared to change in loss ratio for the top 10 UK pecuniary loss insurers, 2005-06 34
Table 10: Change in premium income compared to change in expense ratio for the top 10 UK pecuniary loss insurers, 2005-06 37
Table 11: Premium income compared to change in combined ratio for the top 10 UK pecuniary loss insurers, 2005-06 40
Table 12: Premium income compared to change in loss ratio for the top 10 UK property insurers, 2005-06 43
Table 13: Change in premium income compared to change in expense ratio among the top 10 property insurers, 2005-06 46
Table 14: Change in premium income compared to change in combined ratio for the top 10 UK property insurers, 2005-06 49

Figure 1: Norwich Union was the largest UK personal general insurer in 2006, with a 15.8% market share 9
Figure 2: Several of the leading UK personal insurers did not underwrite any commercial business 11
Figure 3: Only two of the top 10 UK accident and health insurers achieved better loss ratios in 2006 14
Figure 4: Numerous UK accident and health insurers saw their expense ratios increase in 2006 17
Figure 5: Six of the top 10 UK accident and health insurers recorded higher combined ratios in 2006 20
Figure 6: While the average loss ratio of the top 10 UK motor insurers fell in 2006, NIG and Direct Line saw increases in their ratios 24
Figure 7: Norwich Union saw the biggest increase in private motor expense ratio in 2006 27
Figure 8: NIG saw the biggest increase in combined ratio in 2006 30
Figure 9: 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 33
Figure 10: Direct Line achieved strong GWP growth and reduced its expense ratio in 2006, although fellow RBS subsidiary UK Insurance did not fare as well 36
Figure 11: Allianz, Direct Line and St Andrew's achieved the strongest pecuniary loss combined ratio reductions in 2006, largely through decreasing their expense ratios 39
Figure 12: Direct Line, Zurich and Norwich Union saw the best decreases in loss ratio in 2006 42
Figure 13: 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 45
Figure 14: Direct Line and Churchill saw the biggest reductions in combined ratio in 2006 48
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