Aviva Canada bracing for more cat activity in H2 2023

It has paid off some $69 million in cat losses

Aviva Canada bracing for more cat activity in H2 2023

Catastrophe & Flood

By Gia Snape

Aviva Canada’s half-year results showed strong growth that benefited from a “reasonable” catastrophe season, according to CEO Jason Storah (pictured). However, the insurer is bracing for more catastrophe activity in the third quarter.

“We’ve had strong growth on the top line and strong profit on the bottom line,” Storah said. “We feel strongly about our performance relative to our peers. Having said that, I’m very conscious that there are headwinds on the horizon that we’re still managing.”

Several factors drove profitable results for Aviva Canada in the first half of 2023, according to Storah. The company noted 12% premium growth in H1 2023 due to strong commercial lines performance. Its combined operating ratio (COR) edged higher at 92.8% compared to 91.8% last year. 

“The biggest driver for us was our underlying performance, but we also got a bit of benefit from a reasonable cat season,” Storah said. “There was a lot of media coverage around wildfires and floods, but they didn’t have that big an impact on our results.”

Getting ahead of H2 catastrophes

Aviva Canada paid off some $69 million in cat losses in H1, according to the CEO. 

“We expect that in Q3, we will have more cats than we do for the rest of the year. So, we’re very, very sensitive to what happens in terms of weather events,” he added.

Cat activity puts greater pressure on Canada’s supply chain, so the insurer is trying to get ahead by planning resource availability and deploying catastrophe teams around the country “as and when necessary.”

“We have all eyes on the challenges ahead,” Storah said. “We’re conscious of needing to work with our partners and brokers to ensure that we can keep this a healthy industry.”

Focus areas for Aviva Canada

The CEO named the insurer’s personal auto insurance business as a top priority for H2 2023.

“We will be very happy to temper the growth in personal auto by putting more rate through that book,” Storah said.

“Perhaps we are not as competitive as some of the other personal auto carriers, but that would be OK because a 100% combined operating ratio is not where we want to be. We want to be in the mid-90s because that’s a healthy place for that market.”

At the same time, Aviva Canada wants to focus on continuing “great underlying momentum” in commercial lines, which Storah attributed to pricing sophistication and a great team of underwriters.

He also elaborated on the company’s push to internalize claims, which he said has led to better customer outcomes. 

“We’re going to continue focusing on that because we see better satisfaction scores and results overall when it’s been our staff handling our claims,” Storah said. 

Aviva is also looking to roll out more auto claims centres across Canada. The centre, launched in North York, Toronto, saw Aviva partner with trusted vendors to provide repair services and expedite claims for auto insureds. Additional locations are earmarked for the Greater Toronto Area and Alberta by the end of the year.

“Early results from the launch have been positive around consumer satisfaction, turnaround time, and other metrics that are used to measure our claims service,” Storah said.

Finally, Storah emphasized Aviva Canada’s ongoing efforts in sustainability and climate would be a focus for the second half of 2023 and into 2024. 

The company published its 2022 sustainability and climate-related financial disclosure earlier this month. 

How did Aviva Canada fare in H1 2023?

Aviva Canada’s commercial lines saw 17% premium growth driven by a favourable rate environment and strong new business in large corporate and mid-market.

Personal lines grew 8% due to strong new business in RBC and direct and inflationary rating actions across the portfolio.

Operating profit for Canada rose 19% to £240 million in H1 2023, compared to £201 million in the same period last year.

By comparison, Aviva’s UK and Ireland general insurance (UK&I GI) division saw 13% growth in gross written premium for the first half of the year, to £3,219 million compared to £2,840 million the year prior. 

Operating profit for UK&I GI was at £230 million, 41% higher than the year prior. However, undiscounted COR slipped slightly to 96.3% versus 95.3% in H1 2022.

What are your thoughts on Aviva Canada’s catastrophe outlook for Q3 2023? Leave your comments below.

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