Insurance Companies Blame 2009 Losses on Personal Accident & Bodily Injury Claims

We recently heard that rising Personal Accident and Personal Bodily Injury Claims were pushing up the prices of Car Insurance premiums, now as the major UK Insurance Companies take stock of 2009 with the final quarter results, it appears that rising bodily injury claims and an unusually kind hurricane season were the two biggest factors in the 2009 results published to date.

There has been a mixed bag of results in the insurance world this week as a variety of insurance companies have announced how they have fared across the last year.
One of the biggest impacts on the industry was the phenomenal upsurge in the rising cost of bodily injury claims – partly as a result of the recession and partly due to the increase in claims farmers.

Kris Oldland gives Insurance Blog a roundup of the 2009 UK Insurance results so far……….

The insurance arm of part nationalised bank Royal Bank Scotland was heavily hit with profits collapsing by 90% with £448m reserves being set aside for bodily injury (BI) claims.
The group which includes Direct Line, Churchill, Privilege and NIG – posted a drop in net income from £584m in 2008 to £54m last year. Chief executive Paul Geddes claimed that considering their size and risk exposure, 2009 was always likely to be a tough year saying that being “twice as big as anybody else, when the market sneezes we catch a cold.”

Of course many of the major operators within the personal lines market were hit particularly badly by the rising cost in BI claims although RSA managed to reduce the damage to just £30m by taking early action to counter the rising costs.
UK Chief Exec Adrian Brown admitted that “The hit to our result is fairly small compared with some of the other numbers being thrown around.”
He added “When it comes to bodily injury costs, you have to be massively up to date on claims; they are one of the things you have to watch like hell when you are cutting expenses and headcount.”

Another company that felt the impact of rising personal injury claims was the specialist car insurance company Equity Red Star who had a strong full-year profit of A$113m eroded away by bodily injury claims. Insurance Australia group (IAG) who own the company put a statement to market that read “A lower margin of 6.6% reflected reserve strengthening for prior-year bodily injury claims and weaker investment returns, both of which have been felt across the UK industry.”

Meanwhile Allianz have grown their operating profit in the last year by 5% climbing to £203m in the last year while the combined ration improved from 95.2% to 92.9% despite the obviously tough trading conditions.
A large part of the success has been down to Allianz’s hard line stance on driving rate rises of 24%. Chief executive Andrew Torrance predicted more of the same in 2010 commenting that “It remains a priority for in 2010 to increase premium rates to a level that provides an adequate return on the cost of capital.”

Other insurers posting impressive results for 2009 were Amlin and Hiscox who both had strong years due in large to the reasonably benign hurricane season.

Amlin were able to post combined operating ratio improvement from 76% to 72% although their results were padded out slightly by £174.1m in reserve releases whilst Hiscox insurer tripled profits before tax from £105.2m to £320.6m, in what chairman Robert Hiscox described as a “vintage” year.

Another Lloyd’s insurer to triple profits in 2009 thanks to the kind hand dealt by mother nature last year was Brit who increased profits to £171m although an uplift in investment returns of £137.4m last year from £7.4m in 2008 certainly would of helped also.

……..So it looks like a lot of people will be seeking big bonuses?

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