Aviva’s Irish insurance arm sees profits dip amid rising claims

Aviva’s Irish general insurance unit reported on Thursday that its operating profit fell almost 26 per cent last year, amid rising motor and other claims following the lifting of Covid-19 restrictions and as general inflationary pressures weighed.

Aviva Insurance Ireland’s operating profit fell to €32 million from €43 million the previous year, with its combined operating ratio – a gauge that compares claims, costs and expenses as a percentage of premiums – rising to 95.8 per cent from 91.7 per cent.

A figure below 100 per cent indicates an insurer is writing business at a profit. Insurance companies typically target a ratio of 90-95 per cent in a functioning market.

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Gross written premiums increased by 4.4 per cent to €495 million, due to strong growth in the company’s commercial lines business offset by a reduction in personal lines motor business. Average motor premiums declined by 9 per cent to 2022, and have fallen by 40 per cent from their peak in 2016, the company said.

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“We dropped prices in anticipation of both reduced compensation payments and reduced litigation following the introduction of the new personal injury guidelines by the Judicial Council nearly two years ago,” said Aviva Insurance Ireland chief executive Declan O’Rourke, referring to guidelines published in 2021, which have subsequently seen average awards by the Personal Injuries Assessment Board (PIAB) fall significantly.

Mr O’Rourke said that while Aviva’s expectation was that the guidelines would reduce the number of PIAB assessments being rejected and litigated, the level of rejections has since risen from 50 per cent to 61 per cent of motor claims, “eroding the benefits of reform”.

“The average legal costs in a litigated case involving minor injuries are over €16,000 versus zero if the case is settled in PIAB. Aviva urges the Government to review their reforms in order to address the high rejection rates of PIAB assessments and significant inconsistencies between PIAB assessments and court awards,” he said.

Meanwhile, Aviva Life and Pensions Ireland, led by chief executive David Swanton, saw operating profit surge to €60 million last year from €14 million in 2021, driven by “improved underlying profits, reduced expenses and modelling improvements”.

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New business volumes, measured as annual premium equivalent, rose to €242 million from €230 million.

The wider London-listed Aviva group reported a 35 per cent rise in full-year operating profit from continuing operations to £2.2 billion (€2.5 billion) and said that its proposed final dividend for 2022 would bring its total payout per share for the year to 31p from 22p for 2021.

The group also promised to carry out a £300 million share buyback amid pressure from Swedish activist investor Cevian to boost returns. The insurer and asset manager said it had paid more than £5 billion to investors since 2021.

Cevian, best known in Dublin stock market circles for its 4 per cent stake in building materials giant CRH, first revealed a holding in Aviva in 2021. It said on Thursday that the results showed the company had made a “strong start to the next phase”, which it said was delivering on Aviva’s long-term potential.