LV= automobile insurance premiums to improve as profits plummet
LV= has warned that vehicle insurance premiums will be to increase mainly because it blamed the rising value of accident payouts and low interest rates for a dramatic stop by profits inside first 6 months of 2016.
The insurer, Britain’s biggest mutual, said pre-tax profits to 30 June had fallen to 1m, weighed against 49m the year before.
Since the period taught in results, rates of interest are cut as the bank account of England efforts to stabilise the economy following your British vote to exit the european countries on 23 June.
Richard Rowney, LV= leader, said: “We are operating from a prolonged low interest rate environment with significant volatility and this also has created challenging market conditions.”
Profits for that company’s general insurance business, which provides coverage for home and vehicle policies, fell from 70m during the past year to 22m. The insurer reported good boost motor and commercial policy sales, but property insurance premiums were flat. In the first half 2015 there were several “favourable one-offs” which have not been repeated this current year, it said.
Car insurance claims was at the top end of expectations, LV= said, after increases in technology put into the fee for repairs. Low interest rates have put pressure around the returns the insurer can usually get on the money it holds to hide payments.
Rowney suggested this could mean higher prices for purchasers: “As as a consequence of lots of people of reduced investment income and greater claims inflation, we expect to see the strengthening of motor rates continue in the better half of the season.”
LV= said profits by reviewing the life and pensions business had increased to 28m, from 12m within the first half 2015. Total sales had exceeded 1bn, as well as the firm said sales of its specialist retirement products had increased because government’s pension freedoms were introduced in April 2015.
Sales of fixed-term annuities, which provide retirees an assured payout for your fixed period, improved by 42% year on year, while sales of the company’s flexible guarantee products rose by 39%.
“We always view a trend towards blended and hybrid products following government’s pension reforms, as people increasingly exercise their capability to pick out the direction they fund their retirement,” LV= said.
Last year, LV= executives shared an extra pool of just about 40m despite a profits slump.
