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Ogden rate strikes as Aviva is rocked

Ogden rate strikes as Aviva is rocked

Ogden rate strikes as Aviva is rocked Sometimes, statistics are not what they seem – and Aviva’s full-year results announcement, made earlier today, would certainly fall into that category as an assessment of its performance really depends on whether you’re a “cup half full” or a “cup half empty” person.

Pessimists would point to a surge in Aviva UK’s combined operating ratio which stood at 106.3% this year, compared to 95.0% in 2015. That, however, was almost entirely due to the drop in the Ogden rate – without it the company’s operating ratio actually would have improved to 94.9%.

Speaking on a conference call earlier today, Aviva CEO Mark Wilson described the rate as “disjointed policy making” noting that it is “disappointing” because it impacts older and younger drivers – but he believes that change may be coming.

“For us, with our capital position, it’s not really impacted what we’re doing on dividends and buybacks and so on, even though it has a bottom line impact,” he said. “It’s not really about us – investors look through it.

“I applaud the fact that the Government is carrying out an urgent review and they need to. I look around the world and there is nowhere else with a rate like this and it makes no financial or logical sense. I believe that common sense will prevail.”

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Optimists perhaps have much more to shout about – namely a £341 million leap in net written premiums in the UK. Indeed despite a push for its digital channels, Wilson was keen to emphasise that brokers still have an important role to play in the company’s success.

“We see ourselves very much as multi-distribution – it really comes down to how our customers want to deal with us,” he told Insurance Business. “Brokers continue to be a key part of that – and when I talk about digital, I’m also talking about our brokers in the digital space. 

“The broker channel is critically important,” added Maurice Tulloch, the company’s chairman. “We continue to invest - such as with our Fast Trade solution and risk management solution for small business - so it is a very important channel for us.

On the bigger picture, the Aviva Group saw operating profits climb 12% to £3,010 million with general insurance net written premiums climbing 15% to £8,211 million. Its combined operating ratio was 101.1% including the impact of the Ogden rate and 95.2% without it – a climb from 94.6% the prior year.

In a statement issued to Insurance Business, UBS commented that they were an “overall strong set of numbers” and outlined that it expects a “positive reaction.”


 

Related stories:
Discount rate cut to cost insurers £2 billion a year, says public body
Aviva reveals discount rate will give it a nine-figure hit