Aviva’s profits fall as car insurance premiums down 9%

Aviva Insurance Ireland has reported a general insurance operating profit of €32m for 2022, down from a figure of €43m the previous year.

Aviva said its average car insurance premiums declined by 9% in 2022 and average prices are now 40% lower than the peak in 2016.

The insurer said its Gross Written Premiums rose by 4.4% to €495m from €474m in 2021 due to strong growth in its commercial lines business, which was offset by a reduction in personal lines motor business.

Its Combined Operating Ratio – a key measure of profitability in general insurance – saw an increase to 95.8% from the level of 91.7% in 2021.

Aviva’s underwriting profit margin fell to 4.2% from 8.3% in 2021, mainly due to a return to higher, more normalised, claims frequency after Covid restrictions were lifted and rising inflationary pressures.

Declan O’Rourke, Aviva Insurance Ireland chief executive, said the company’s general insurance business in Ireland performed positively in a challenging market in 2022.

“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,” Mr O’Rourke said.

“Our long term expectation was that the Guidelines would bring consistency to court awards and assessments from the Personal Injuries Assessment Board (PIAB) and reduce the number of PIAB assessments being rejected and litigated to 5%,” he said.

But he noted that the number of PIAB rejections in litigation has in fact increased from 50% to 61% for motor claims, eroding the benefits of reform.

“The average legal costs in a litigated case involving minor injuries is over €16,000 versus €0 if the case is settled in PIAB,” he said.

“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 added.

During the year, the company entered the high net worth insurance market through the acquisition of Azur and partnership with Dual.

The company’s British parent Aviva today increased its payouts to investors including a pledged £300m share buyback, after navigating a volatile year in its key markets amid pressure from activist investor Cevian to boost returns.

The insurer and asset manager said it had paid more than £5 billion to investors since 2021, just topping Cevian’s demand for that figure to be returned over the year.

The FTSE 100 firm also announced a final dividend of 20.7 pence per share.

Aviva reported a 35% rise in 2022 operating profit from continuing operations to £2.2 billion, up from £1.6 billion the previous year and trumping analyst forecasts.

However, it made an accounting loss of £1.1 billion, compared to a £2 billion profit the previous year, which it blamed on adverse market movements in 2022.

Aviva’s solvency ratio, a key measure of capital strength, came in at 212%, down from 244% the previous year.

Following a pension scheme payment and investor payouts, this fell to an estimated 196%, the company said.

Since taking charge three years ago, Aviva CEO Amanda Blanc has raised billions from selling business units across the globe and has sought to more aggressively cut costs.

The company’s general insurance gross written premiums increased 8% to £9.7 billion, while its fund arm Aviva Investors reported external net flows of £1.3 billion, down from £3.3 billion the previous year.