Performance Ratio Benchmarking of the Top UK General Insurers 2008

Performance Ratio Benchmarking of the Top UK General Insurers 2008 provides the reader with an in-depth analysis of the performance ratios of the top 10 UK insurers across five major lines of business: accident and health, liability, motor, pecuniary loss and property insurance.

Report Highlights
All top 10 property insurers saw their loss ratio increase in 2007 due to the summer floods.

The average combined ratio of the top 10 UK liability insurers improved by 7.7 percentage points, with AXA, Zurich and RSA seeing the largest decreases in 2007.

The motor insurance market recorded a heavy underwriting loss in 2007 and motor insurers made significant reserve releases.
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Overview 1
Catalyst 1
Summary 1
TABLE OF CONTENTS 2
Table of figures 3
Table of tables 4
Performance ratio benchmarking in UK accident and health insurance 5
The average loss ratio of the top 10 UK accident and health insurers decreased by one percentage point in 2007, with five insurers witnessing an improvement in their ratios 5
The average loss ratio of the top 10 UK accident and health insurers improved marginally in 2007 5
New Hampshire and ACE witnessed significant improvements in their loss ratios in 2007 5
Norwich Union, ComInsofAmerica, SimplyHealth and Standard Life saw their loss ratios deteriorate in 2007 5
The average expense ratio of the top 10 UK accident and health insurers decreased by 1.2 percentage points in 2007, as five insurers saw improvements in their ratios 7
The average expense ratio of the top 10 UK accident and health insurers decreased by 1.2 percentage points in 2007 7
ACE, Norwich Union and Simply Health achieved the largest improvements in their expense ratios 7
AXA, ComInsofAmerica and Standard Life saw the largest increase in their expense ratios 8
The rest of the top 10 UK accident and health insurers saw marginal changes in their expense ratios 8
The average combined ratio improved by 2.2 percentage points, with ACE and New Hampshire seeing the two largest decreases in 2007 10
The average combined ratio of the top 10 accident and health insurers decreased by 2.2 percentage points to 90.2% 10
Five of the top 10 UK accident and health insurers recorded improvements in their combined ratios in 2007 10
ACE and New Hampshire saw the largest decrease in their combined ratios, which were significantly higher than their peers 10
Three of the top 10 accident and health insurers experienced marginal changes to their combined ratios in 2007 11
Four of the top 10 UK accident and health insurers witnessed increases in their combined ratios 11
Performance ratio benchmarking in UK liability insurance 14
Five of the top 10 insurers witnessed an improvement in their loss ratios in 2007 14
The average loss ratio of the top 10 UK liability insurers decreased by 10.9 percentage points in 2007 14
NFU Mutual and QBE saw the largest increase in their loss ratios 14
AXA, Zurich and RSA achieved significant improvements in their loss ratio 14
New Hampshire achieved an improvement in its loss ratio and premium income growth 14
All of the top 10 liability insurers recorded an increase in their expense ratios in 2007 16
The average expense ratio of the top 10 liability insurers increased by 3.2 percentage points in 2007 16
New Hampshire possessed the lowest expense ratio in 2007 16
Norwich Union, Zurich, RSA and Allianz recorded the highest increases in their expense ratios in 2007 16
The average combined ratio of the top 10 UK liability insurers improved by 7.7 percentage points, with AXA, Zurich and RSA seeing the largest decreases in 2007 18
The average combined ratio of the top 10 liability insurers decreased by 7.7 percentage points to 94.4% 18
NFU Mutual saw the largest increase in its combined ratio in 2007, which was significantly higher than its peers 18
Four of the top 10 UK liability insurers managed to improve their combined ratios significantly 18
Performance ratio benchmarking in UK motor insurance 21
The motor insurance market recorded a heavy underwriting loss in 2007 and motor insurers made significant reserve releases 21
The motor insurance market recorded an accident year combined ratio of 113.2% in 2007 21
Motor insurers have increasingly relied on reserve releases in recent years 21
The average loss ratio of the top 10 UK motor insurers increased in 2007 22
The average loss ratio of the top 10 motor insurers rose by 0.9 percentage points in 2007 22
Four insurers saw their loss ratios increase 22
Six of the top 10 motor insurers recorded a decline in their loss ratios in 2007 22
The average expense ratio of the top 10 UK motor insurers decreased marginally, with Allianz recording the largest reduction in 2007 24
The average expense ratio of the top 10 UK motor insurers decreased by 0.1 percentage points to 27.4% 24
RSA, Norwich Union and UKI saw the largest increases in their expense ratios 24
Half of the top 10 UK motor insurers achieved an improvement in their expense ratios 25
Allianz witnessed the greatest improvement in its expense ratio which was significantly larger than its peers 25
Zurich, NIG, Churchill and Fortis recorded a moderate deduction in their expense ratio 25
The average combined ratio of the top 10 UK motor insurers increased moderately 27
The average combined ratio of the top 10 motor insurers increased by 0.7 percentage points 27
Four insurers recorded an increase in their combined ratio 27
Six of the top 10 insurers recorded a reduction in their combined ratios in 2007 27
Performance ratio benchmarking in UK pecuniary loss insurance 30
The average loss ratio of the top 10 UK pecuniary loss insurers decreased in 2007 30
The average loss ratio of the top 10 UK pecuniary loss insurers decreased by 2.3 percentage points in 2007 30
Only three of the top 10 UK pecuniary loss insurers improved their loss ratios in 2007 30
Allianz and Norwich Union saw the largest loss ratio increases in 2007 30
Six of the top 10 pecuniary loss insurers saw an increase in their expense ratios 32
The average expense ratio of the top 10 UK pecuniary loss insurers rose by 1.1 percentage points in 2007 32
Four of the top 10 UK pecuniary loss insurers achieved significant improvements in their expense ratios 32
AXA, UKI, St Andrews and Landmark saw the largest increases in their expense ratios in 2007 33
The average combined ratio of the top 10 UK pecuniary loss insurers improved moderately 34
The average combined ratio of the top 10 pecuniary loss insurers decreased by 1.2 percentage points 34
UKI and Direct Line were the only two players that achieved an improvement in their combined ratios and GWP growth 34
AXA saw the largest increase in its combined ratio among the top 10 UK pecuniary loss insurers 35
Performance ratio benchmarking in UK property insurance 38
All top 10 property insurers saw their loss ratio increase in 2007 due to the summer floods 38
The average loss ratio of the top 10 UK property insurers increased by 23.1 percentage points 38
St Andrews, Direct Line, Lloyds TSB and Zurich experienced significant increases in their loss ratios 38
Six insurers returned loss ratios that were below the market average in 2007 38
Allianz and RSA achieved the smallest ratios in 2007, which were significantly below the market average 38
AXA, Churchill, Norwich Union and NIG achieved below average loss ratios, despite seeing large increases 39
The average expense ratio of the top 10 property insurers increased in 2007, with NIG and Direct Line recording the largest individual increases 41
The average expense ratio of the top 10 property insurers rose by one percentage point in 2007 41
Churchill, Lloyds TSB and St Andrews achieved expense ratio reductions 41
Seven of the top 10 property insurers witnessed their ratios deteriorate in 2007 42
NIG and Direct Line experienced the largest increases in their expense ratios 42
RSA, Zurich, AXA, Allianz and Norwich Union saw moderate increases to their expense ratios 42
All top 10 property insurers saw their combined ratio increase in 2007 44
The average combined ratio of the top 10 property insurers rose by 24.1 percentage points in 2007 44
Four insurers saw their combined ratios increase by more than 30 percentage points 44
Churchill and Allianz recorded moderate increases to their combined ratios 45
APPENDIX 47
Definitions 47
Average 47
Earned premiums 47
Gross premium 47
Net premium 47
Written premiums 47
Loss ratio 47
Expense ratio 47
Combined ratio 47
Further Reading 48
Ask the analyst 48
Datamonitor consulting 48
Disclaimer 48
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Table 1: Premium income compared to change in loss ratio for the top 10 UK accident and health insurers, 2006-07 7
Table 2: Premium income compared to change in expense ratio for the top 10 UK accident and health insurers, 2006-07 10
Table 3: Premium income compared to change in combined ratio for the top 10 UK accident and health insurers, 2006-07 13
Table 4: Change in premium income compared to change in loss ratio for the top 10 UK liability insurers, 2006-07 16
Table 5: Change in premium income compared to change in expense ratio for the top 10 UK liability insurers, 2006-07 18
Table 6: Change in premium income compared to change in combined ratio for the top 10 UK liability insurers, 2006-07 20
Table 7: Combined ratio and accident year combined ratio, total motor market, 2003-07 22
Table 8: Premium income compared to change in loss ratio for the top 10 UK motor insurers, 2006-07 24
Table 9: Premium income compared to change in expense ratio for the top 10 UK motor insurers, 2006-07 27
Table 10: Premium income compared to change in combined ratio for the top 10 UK motor insurers, 2006-07 29
Table 11: Premium income compared to change in loss ratio for the top 10 UK pecuniary loss insurers, 2006-07 32
Table 12: Premium income compared to change in expense ratio for the top 10 UK pecuniary loss insurers, 2006-07 34
Table 13: Premium income compared to change in combined ratio for the UK top 10 pecuniary loss insurers, 2006-07 37
Table 14: Premium income compared to change in loss ratio for the top 10 UK property insurers, 2006-07 41
Table 15: Premium income compared to change in expense ratio among the top 10 property insurers, 2006-07 44
Table 16: Premium income compared to change in combined ratio among the top 10 property insurers, 2006-07 46
Figure 1: New Hampshire and ACE recorded the largest improvements in their loss ratios in 2007 6
Figure 2: ACE and Norwich Union saw the largest improvement in their expense ratios in 2007 9
Figure 3: ACE achieved the largest decrease in its combined ratio, which was accompanied by GWP growth in 2007 12
Figure 4: Half of the top 10 UK liability insurers saw their loss ratios improve in 2007 15
Figure 5: All of the top 10 liability insurers recorded an increase in their expense ratios in 2007 17
Figure 6: AXA, Zurich and RSA recorded the largest improvements in their combined ratios in 2007 19
Figure 7: Motor insurers have become increasingly reliant on reserve releases to bolster their reported profitability 21
Figure 8: Six insurers recorded a decline in their loss ratio in 2007 23
Figure 9: Allianz's expense ratio improved significantly in 2007 26
Figure 10: A number of insurers saw their combined ratios increase in 2007 28
Figure 11: The majority of the top 10 experienced a moderate increase to their ratios in 2007 31
Figure 12: Norwich Union and GEFI both achieved significant decreases in their expense ratios 33
Figure 13: Half of the top 10 UK pecuniary loss insurers achieved an improvement in their combined ratios in 2007 36
Figure 14: All top 10 property insurers saw their loss ratio increase in 2007 due to the summer floods 40
Figure 15: Lloyds TSB was the only insurer to improve its expense ratio and achieve GWP growth at the same time in 2007 43
Figure 16: All top 10 property insurers saw their combined ratio increase in 2007 45
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