Ageas UK sees strong recovery in second quarter

Executive Summary

Net Profit recovers in the second quarter

  • Net profit of GBP 26.3 million compared to GBP 49.1 million at H1 2013. Second quarter profit of GBP 30.8 million.
  • Overall combined ratio at 100.7% (H1 2013 96.3%) reflecting weather impact, but improved from 106.1% in the first quarter 2014. Second quarter combined ratio was 95.5%.

Total income stable despite tough market conditions

  • Total income up 0.4% to GBP 1077.5 million (H1 2013: GBP 1073.2 million).
  • Total Non-Life Gross Written Premiums (GWP) up 0.4% at GBP 940.4 million.
  • Total inflows from Retail businesses down 9.0% at GBP 84.6 million due to continued competitive environment.
  • Protection GWP up 20.2% to GBP 52.5 million.

Well capitalised business

  • Strong capital positions maintained in Ageas Insurance, Ageas Protect and Tesco Underwriting

Announcing the first six month results for 2014, Andy Watson, Chief Executive of Ageas UK commented: “Following the impact of the severe weather events on the first quarter result, I’m pleased to report that we have recovered well in the second quarter. The fact that this recovery has been achieved against tough market conditions shows that Ageas continues to be in good shape. The Motor market remains competitive and challenging, but our focus is on profitable growth through a disciplined underwriting approach. At the same time, responding to the very competitive market conditions, action is being taken to improve expenses and build long term growth within our Retail business. Our people continue to deliver customer service above market norms and we are delighted with the external recognition and awards they have won in the first half of the year.”

Business Results

As a result of the implementation of IFRS 10, Ageas will no longer consolidate Tesco Underwriting, but will report it as a non-consolidated partnership from the first quarter of 2014 and therefore will not include the Tesco Underwriting result in the combined ratio. All historic data has been restated accordingly. The management and operation of the partnership remain unchanged.

Ageas UK

Ageas UK continues to focus on delivering profitable returns, reflecting a clear and consistent multi-distribution strategy and partnership approach with brokers, affinities, Independent Financial Advisers (IFAs), intermediaries and through its own Retail businesses. The combination of high quality service and low cost delivery remains a key area of focus for all the Ageas UK businesses.

The company reported a net profit of GBP 26.3 million (H1 2013: GBP 49.1 million profit) reflecting the impact of storms and floods that hit the UK in the first quarter. The second quarter delivered a good recovery in the result at GBP 30.8 million (vs. GBP 29.7 million in Q2 2013).

Total income including Tesco Underwriting was stable at GBP 940.4 million (H1 2013: GBP 936.5 million) with the benefits of our wider insurance proposition to brokers offsetting a tough trading environment in Retail, and more generally in Motor where average market premiums are reportedly down between 5% to 19.3% year-on-yeari.

Ageas has over 9 million customers across its businesses in the UK, insuring 3.6 million Motor policies, making it the second largest UK Motor insurerii. This was further strengthened with the confirmation that John Lewis has extended it relationship with Ageas for an additional five years to provide car insurance to the retail brand’s customers.

Continuing its commitment to the broker market, Ageas announced two new strategic partnerships: one as the lead Underwriter for Footman James, demonstrating Ageas’s strength in non-standard Motor and understanding of Classic Car ownership; and the other with Darwin Clayton (UK) Ltd, one of the longest established independent insurance brokers in the UK, providing a multi-million pound cleaning and facilities management insurance scheme.

Ageas continues to focus on service delivery and best practice performance as evidenced by another successful quarter in terms of recognition, with a number of industry firsts. Already ServiceMark accredited by the Institute of Customer Services for its Household service, Ageas has now achieved the standard for its Motor and Travel Claims and Underwriting services, making it one of the first insurers to achieve the ServiceMark accreditation. Ageas Law, the partnership set up in April 2013 to provide non-fault motor customers access to quality legal services, was the first insurer Alternative Business Structure to be awarded the Law Society’s Lexcel Practice Management quality standard.

Among other awards, Ageas was also recognised as ‘General Insurer of the Year’ at the prestigious British Insurance Awards and picked up the ‘Business Transformation Deal of the Year for the acquisition and ongoing integration of Groupama Insurance Company Limited.


Ageas Insurance

Ageas Insurance’s net result was GBP 21.8 million (H1 2013: GBP 41.2 million) and reflects the impact of the storms and floods in the first quarter.

Gross Written Premiums (GWP) during 2014 increased by 0.3% to GBP 717.6 million (H1 2013: GBP 715.4 million).

Motor (Private Car and Commercial Vehicle) income dropped slightly to GBP 427.2 million (H1 2013: GBP 433.8 million). Aligned with the current market trend, Ageas Insurance has seen lower average premiums but continues to maintain its pricing discipline. Following the launch of dynamic pricing on motor and household, Ageas rolled this out across the commercial vehicle product in the second quarter enhancing data enrichment.

Household income was up 3.8% at GBP 168.9 million (H1 2013: GBP 162.7 million), as a result of the positive impact of Ageas Insurance becoming the sole underwriter for Ageas’s over 50’s brands and the growth of niche business as part of Ageas’s new wider product range. Despite the weather impact in the first quarter, Ageas’s average premiums for Household remained flat, while average premiums across the market were down.

Commercial and Special Risks inflows saw an increase of 8.6% to GBP 88.9 million (H1 2013: GBP 81.9 million) due to the additional capability of Ageas Insurance and growth in scheme business. Growth is expected to continue in the second half of 2014 focusing on Commercial Motor, schemes business and e-trading.

The combined ratio for Ageas Insurance deteriorated year on year to 100.7% (vs. 96.3%) largely driven by adverse weather in the first quarter affecting the Household result. Following the impact of some large losses and weather claims in the first quarter, the Motor ratio returned to a sub 100% performance by the end of June at 99.6% (vs. 101.6% Q1 2014 and 97.0% H1 2013).

Tesco Underwriting

Tesco Underwriting, the Motor and Household insurance partnership with Tesco Bank, of which 50.1 per cent is owned by Ageas, generated GWP of GBP 222.8 million during the period (H1 2013: GBP 221.1 million). In a market environment of strong competition in Motor, Tesco Underwriting is focusing both on maintaining firm pricing discipline through the underwriting cycle and on its Clubcard customers, improving the book’s risk profile.

The net result, after minority interests, was negative GBP (1.4) million (H1 2013: positive GBP 1.7 million) reflecting the market wide weather impact.

Life Protection:

Total GWP inflow increased by 20.2% to GBP 52.5 million (H1 2013: GBP 43.7 million) driven by the company’s award-winning approach to underwriting and technology, high levels of service and product innovation. New Annual Premiums increased by 7.3% to GBP 16.9 million (H1 2013: GBP 15.8 million).

Ageas Protect’s post tax result was a profit of GBP 1.0 million compared to a loss of GBP (1.3) million for the same period last year as the business continues to grow and build scale.

As part of its commitment to offer compelling products to intermediaries, the business extended its products to IRESS, The Exchange multi-benefit protection comparison service, in June allowing advisers to mix and match products to give clients bespoke solutions to meet their protection needs.

Continuing its award winning approach, Ageas Protect picked up the adviser nominated FTAdviser Online Service Award for ‘Most Improved Provider’ and achieved a five star rating in the Life and Pensions category.

In a separate announcement made today, Ageas has agreed to sell its 100% shareholding in Ageas Protect Ltd to AIG, subject to regulatory approval. Ageas will continue to focus and develop its core Non-Life activities in the UK. The transaction is expected to be completed by the end of the year.

Other Insurance Activities:

Within Ageas UK’s Other Insurance activities, the net profit was GBP 4.9 million (H1 2013: GBP 7.5 million) including the proceeds of a legal settlement in the first quarter.

The Retail companies delivered a net profit of GBP 6.7 million (H1 2013: GBP 14.5 million) impacted by total inflows being down 9.0% to GBP 84.6 million (H1 2013: GBP 93.0 million) reflecting a tough and highly competitive environment leading to lower volumes and squeezed margins.

As part of a new Retail strategy to respond to the continued challenges of a competitive market, actions are now being taken to improve expenses and build long term growth including a multi-million pound investment programme in pricing, data analytics and marketing capability. As part of the growth strategy and in addition to the extension of Ageas Retail’s Motor deal with John Lewis, there were also new deals with the Family Building Society providing home buildings and contents insurance and the provision of van insurance to Vauxhall customers. As part of simplifying the Retail businesses from seven legal entities into one, RIAS and Castle Cover became part of Ageas Retail Limited at the end of July with the plan to move the other Retail brands to this single legal entity by the end of the year.

Ageas Retail consists of Ageas 50 (managing the RIAS and Castle Cover brands), Kwik Fit Insurance Services and Ageas Insurance Solutions, all of which strengthen Ageas’s overall distribution and manufacturing mix.

Ageas UK Results Summary:

  To end of June 2014
in £ millions
To end of June 2013
in £ millions
Income (including TU)
Other Insurance including Retail
Life Protection


Net Profit
Other Insurance including Retail
Life Protection


Key Ratios (excluding TU*)
Total Combined ratio
Non-Life Motor
Non-Life Household
Non-Life Accident & Health
Non-Life Commercial & Special Risks



* Tesco Underwriting (TU) no longer consolidated from Q1 2014. Historic data restated accordingly.

i Car Insurance Price Index Q2 2014, in association with Towers Watson; AA British Insurance Premium Index Q2 2014; Association of British Insurers Average Comprehensive Private Motor Insurance Premium Tracker Q2 2014.

ii Based on volume. AM Best and internal analysis of FSA Returns 2012.