Insurance profits sunk

Aug 10 2007 by Alistair Houghton, Liverpool Daily Post

INSURANCE giant Aviva has been left counting the cost of this year’s massive flooding in the UK as its profits for the first half of the year fell by 8%.

Aviva, which owns Norwich Union and its Liverpool claims centre, forked out £235m for weather damages in the six months to the end of June, including £175m after the flooding in June and £60m from storms in January.

Aviva also sustained losses of £165m from further flooding in July in the south of England, bringing its total weather-related loss to £400m this year.

The impact cut profits at its UK general insurance and health arm by 50% to £284m, with operating profits across the whole group down 8% to £1.54bn.

The weather losses overshadowed a strong performance elsewhere in the business. UK sales were at record levels – up 7% to £7.4bn – while margins also increased.

Norwich Union still employs 444 people in Moorfields, Liverpool. Last year it closed its office in Water Street with the loss of more than 300 jobs, moving its work to India.

Aviva’s new chief executive Andrew Moss confirmed the group was now looking to raise home insurance premiums by an average of 10%, although he said this would not be a blanket rise.

He said: “The market has been static in terms of price while household losses have been going up. Homes have more bathrooms, which increases the chance of water damage, and wooden flooring rather than carpets, which costs more.”

He added the average household insurance premium cost about £350, but initial indications show average flood claims are around £15,000.

Other insurers have echoed Aviva’s sentiment, with Axa saying yesterday it would be reviewing premium rates after its bill for the first set of floods hit £78m. It expects the July floods to cost it an extra £120m.

Earlier this month, the Association of British Insurers estimated insurers were facing bills of around £3bn after it received almost 60,000 claims.

Royal & Sun Alliance, which employs just under 1,300 people in Liverpool, said earlier this week it expected its combined bill would be in the region of £120m.

alistairhoughton