U.K. Insurers’ Results To Reflect Rate Upturn, Storm Losses

February 26, 2001

Despite last week’s announcement by CGNU, the U.K. ‘s largest insurer, that net operating profit would be affected by damage claims from November’s storms, analysts expect Legal & General and Royal & Sun Alliance, who will also announce 2000 results this week, to show net revenue increases.

L&G is expected to post a 4 percent gain in new life insurance business, its principal activity, while continuing to profit from its bancassurance tire-up with Barclays. November storm losses will have only a minimal impact.

RSA, while estimating storm losses at between £180 and £200 million ($261 and $290 million), is expected to benefit from the upturn in rates for the p/c sector. Indicative of the trend was RSA’s announcement that homeowner policies in Ireland, where it has a 28 percent market share, are expected to rise by around 30 percent with the average cost of a standard policy increasing from £200 to £260 ($290 to $$377).

Rate raises were necessary, said the insurer, due to the strength of the Irish economy and the increased costs of settling claims. “The day of cheap reinsurance is gone, and claims inflation and adverse weather events are driving up costs. Insurers need to change their pricing models in a changing environment,” RSA’s Eamon Hurley was quoted as saying.

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