Insurance & Investment
General Insurance Business
Financial Performance
General Insurance profit decreased by 24% to £232m (2006 £304m) reflecting the £135m cost of the floods in June and July 2007, which outweighed the positive impact from good volume growth in household insurance.
Underlying non-interest income, net of claims costs, decreased 13% to £358m (2006 £413m). Excluding the flood claims costs, net operating income grew by 17%. Underlying operating expenses increased by 10% to £149m (2006 £136m) largely reflecting additional investment in marketing and sales resource as we seek to capitalise on growth opportunities in household insurance.
| Income Statement | Year ended 31.12.2007 £m |
Year ended 31.12.2006 £m |
| Net interest income | 23 | 27 |
| Underlying non-interest income | 358 | 413 |
| Fees and commission income | 41 | 16 |
| Fees and commission expense | (518) | (546) |
| Net earned premiums on General | ||
| Insurance contracts | 1,247 | 1,315 |
| Change in value of in-force long term assurance business | 10 | (5) |
| Investment and other operating income | 89 | 68 |
| Net claims incurred | (441) | (352) |
| Change in insurance contract liabilities | (68) | (46) |
| Share of losses of associates and jointly controlled entities | (2) | (37) |
| Underlying net operating income | 381 | 440 |
| Underlying operating expenses | (149) | (136) |
| Underlying profit before tax | 232 | 304 |
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Operational Performance
General Insurance sales, as measured by GWP, fell by 1% to £1,761m (2006 £1,786m excluding sales through Paymentshield which was sold in November 2006). Both Motor (up 12%) and Household (up 5%) delivered strong performances offset by lower sales in Repayment Insurance (down 9%).
| General Insurance Sales | Gross Written Premiums | |
| Year ended 31.12.2007 £m |
Year ended 31.12.2006 £m |
|
| Household | 549 | 525 |
| Repayment: | ||
| 1st party | 501 | 528 |
| 3rd party | 345 | 405 |
| Motor | 335 | 298 |
| Other | 31 | 30 |
| Total excluding Paymentshield | 1,761 | 1,786 |
| Paymentshield | 108 | |
| Total | 1,761 | 1,894 |
The Combined Operating Ratio (which measures claims costs and operating expenses as a percentage of premium income) of our General Insurance business was 90% (2006 82%), a strong performance notwithstanding the flood claims costs. On an underlying basis, excluding the cost of the floods, our Combined Operating Ratio was 82%.