Insurance companies make huge profits

INSURANCE companies in the Irish market are making bumper operating profits as yesterday's disclosure by Hibernian Insurance revealed profits on general insurance rose by 60% to €101 million.

The massive increase in operating profits in general insurance business achieved by Hibernian in the first six months of the year is all the more remarkable as revenue from insurance premiums in the same period actually fell by €55 million, an 11% drop, over the first half of 2003.

Hibernian, part of the Aviva Plc, saw operating profits in Ireland on all insurance business increase by 17%, in the first six months of this year over the first six months of 2003, from €108.4m to €127.1m. Again the overall increase in profits came against a background of declining income from premiums down from €835m in the first half of 2003 to €792 in the first six months of 2004, a 5% fall in income.

The company's life and pensions component was the worst performing area with operating profit were €26.1 million compared to €45.1 million in 2003, a 42% fall. Funds under management at June 30 were €8.1 billion.

Hibernian Group chief executive Bryan Jenkins, said: "Overall the half-year performance was good with positive underlying performance right across all our businesses.

"In general insurance, the strong operating result reflects a combination of our disciplined underwriting, lower claims costs across the board and better-than-expected weather claims experience. As a result of the improvement in profitability, the market dynamics are changing and we are experiencing an increase in competition," he added.

Mr Jenkins said sales growth in term assurance and pensions was positive.

"However, operating profit was lower at €26.1m due to a more cautious assessment of the future persistency environment, particularly on unit-linked pensions," he revealed.

Mr Jenkins restating the group's commitment to Government-led initiatives to control costs.

"It is early days, but the success of initiatives like the newly operational PIAB together with more stringent enforcement of road safety legislation have the potential to lead to further reductions in claims and associated costs for our customers. Already, we have seen premiums for motor business fall to levels last seen in 1999."

Hibernian said its continuing strategy in general insurance is to reward responsible customers through the provision of lower premium costs. "For example, in private motor insurance the company last month announced an increase to its penalty points free discount from 10% to 17.5%. This move, combined with the Ignition driver-training programme which offers successful drivers a discount of up to 40% on their premiums, continues to make a positive impact," he said.