S&P Report Says U.K. Motor Insurance Mkt Unprofitable

    LONDON--Oct. 9, 2001--Standard & Poor's--Despite the U.K. motor insurance market reporting a 20% increase in gross premiums written to GBP9.57 billion in 2000, double the rate of premium growth in 1999, the industry net combined ratios improved by only five percentage points and, overall, the sector remains unprofitable, Standard & Poor's said in an industry report to be published today.
    With the market's combined ratio still high at 113%, even continued double-digit increases in gross written premium during 2001 may not be sufficient to take the industry to a "breakeven" position.
    "As a whole, the market has historically found it hard to achieve profitability. Between 1985 and 2000 only two years, 1993 and 1994, saw overall combined ratios fall below the 100% breakeven level," said Alison Pritchard, an analyst in Standard & Poor's Financial Services Ratings in London and author of the report. "Tellingly, in 2000, of the top 10 groups, ranked by gross written premium and representing 86% of the market, only one achieved a combined ratio below 100%."
    The five largest insurance groups operating in the market, AXA Group, Direct Line Group, CGNU PLC, Royal & Sun Alliance, and Zurich Financial Services, saw a two percentage point improvement in their aggregate combined ratio, although at 115% this remains two percentage points weaker than the market aggregate.
    Premium growth, meanwhile, was significant across most lines of business. The largest risk group in the market, private comprehensive, saw its average earned policy premium rise 11% in 2000 to GBP313, comparable to the noncomprehensive sector, which reported growth of 13% to GBP263. The highest growth in average policy premiums, however, was in the fleet sector, which reported a rise of 25% to GBP552, reflecting its high claims frequency of 26%.
    "The fleet sector's high claims frequency, which has increased steadily from 22% in 1995, tops a wide band between the different risk groups, with the comprehensive and noncomprehensive markets showing claims frequency of 18% and 8%, respectively. Nevertheless, the average across all groups in 2000 remained comparable to 1999 levels at about 17%," said Ms. Pritchard.
    The average cost of claims, meanwhile, saw conflicting trends in 2000. Claims costs fell by 2% for both noncomprehensive and fleet car cover to GBP2,594 and GBP1,742, respectively, but increased 7% to GBP1,521 for comprehensive private car cover.

    The report, entitled "Standard & Poor's U.K. Motor Review 2000", will be available later today on RatingsDirect or can be acquired by phoning (44) 20-7847-7024. Complementary copies will be available to the press on (44) 20-7847-7027.