Help

BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

PROFITS DOWN FOR U.K. INSURERS, RECOVERY NOT LIKELY SOON: ABI

Reprints

LONDON-The profitability of British insurance companies fell last year and is set to weaken even more this year.

Earnings in 1998 also could be down unless underwriters quickly implement adequate rate increases, the Assn. of British Insurers has warned.

Figures released last week by the ABI show that after four years of improving results, British insurers' 1996 profits fell 30% to 3 billion pounds ($5.04 billion, using 1996 year-end exchange rate), from 4.3 billion pounds ($6.68 billion, using 1995 year-end exchange rate) the year before.

Premiums dipped 2% to 35.3 billion pounds ($59.35 billion) from 36.0 billion pounds ($55.91 billion).

Underwriting losses more than tripled to 1.9 billion pounds ($3.19 billion) from 600 million pounds ($931.8 million) after all main areas of business produced worse results.

The ABI blamed the deterioration in the U.K. results on a combination of higher claims and lower premiums caused by severe competition.

Mark Boleat, the ABI's director general, warned that "to maintain profit levels this year, or achieve an increase, will require higher premiums or a reversal of the recent upward trend in claims."

However, he warned, "Further pressure on profits can be expected this year with strong competition for business and higher claims in a number of important areas."

The association's deputy director general, Tony Baker, was equally pessimistic about pros-pects, warning that an anticipated increase next month in the U.K. insurance premium tax rate could lengthen the time before the insurance cycle recovers.

Commenting on premiums in the United Kingdom, Mr. Baker said the auto line, sometimes seen as an indicator of trends to follow in the rest of the market, is showing premium increases of about 5%.

However, he warned that this is well short of the 10% rate increases the sector needs to return to profit.

For non-auto business, which includes property, accident and health, general liability and financial loss, the downward pressure on rates appears to have ended, Mr. Baker said.

However, he added that competition remains fierce, "and it will be difficult to get any rate increases to stick."

Most of last year's decline in earnings was attributable to a marked deterioration in U.K. underwriting results.

In the U.K. auto line, underwriting losses soared to 633 million pounds ($1.06 billion) from 80 million pounds ($124.2 million), while the underwriting profit on U.K. non-auto business dropped to 173 million pounds ($290.9 million) from 421 million pounds ($653.8 million).

Marine, aviation and transport, or cargo, insurance had an underwriting loss of 52 million pounds ($87.4 million) after a 1995 profit of 29 million pounds ($45 million). The reinsurance account not including that sector lost 263 million pounds ($442.2 million), after a 1995 loss of 66 million pounds ($102.5 million).