Aviva Canada ended 2023 with an undiscounted combined operating ratio (COR) of 95.3% and double-digit growth in gross written premiums, despite challenging market conditions that included increased weather-related losses and heightened auto theft.
The undiscounted ratio for 2023 was up 1.6% from 2022. The personal lines combined ratio last year stood at 99.5%, while the commercial lines COR was 88%.
In Canadian personal lines, the combined ratio was up 4.3 points from 95.2% in 2022. This reflected “heightened weather-related losses, higher reinsurance costs, claims frequency returning to more normal levels and elevated Ontario auto theft,” Aviva plc said in a presentation on its 2023 full year results released Thursday.
The personal lines’ combined ratio was “partially offset by lower commissions and expenses, as well as strong performance in personal property due to the hard rate environment and prudent risk selection.”
Despite the COR deterioration, Aviva Canada CEO Tracy Garrad said the business is still performing well. “Getting rate through on personal lines — in auto, in particular — is a challenge with recovery back to pre-COVID frequency on motor,” she told Canadian Underwriter in an interview Thursday. “We’ve had some catch-up to do there, but I think generally, really good performance on top line.”
In terms of negative influences, she said auto theft was one of the biggest drivers. Supply chain inflation across auto and home restoration, and unprecedented weather events (especially wildfire) also contributed.
“But notwithstanding all of that, we beat our targets in terms of the operating profit, which we are very happy about. And I think that gives us a really solid foundation for continued growth as we go forward.”
Aviva Canada’s operating profit was £399 million, up 18% from 2022.
Industry results
The insurer’s personal lines results were in line with what the Canadian P&C market has seen recently.
Last year, severe weather caused more than $3.1 billion in insured damage across the country. Primary insurance carriers also saw a difficult Jan. 1, 2023 reinsurance renewal season. And auto theft resulted in more than $1.2 billion in claims for the industry in 2022, the costliest year on record, and a trend that continued in 2023.
Both personal and commercial lines have been affected by the historic increase in the frequency of weather events as well as inflationary and replacement cost pressures.
“It’s more difficult for us to catch up on rate in the personal lines space, particularly on auto because of the requirements of the regulatory filings,” Garrad said. “And indeed in some provinces like Alberta with the rate cap…”
In commercial lines, Aviva Canada’s undiscounted COR dropped 2.9 points to 88%, “reflecting the beneficial impact of rating actions and improved efficiencies on underwriting performance and favourable [prior-year development],” the insurer reported. The overall discounted ratio stood at 91.4%, similar to the 2022 restated value of 92%.
Improved underwriting performance, lower expenses and favourable prior-year development contributed to the improved commercial lines ratio, partially offset by increased weather-related losses, the impact of inflation on claims severity and slightly higher commissions.
Overall, GWP in Canada for Aviva Canada increased to £4.248 billion (2022: £4.009 billion), up 10% on a constant currency basis.
In personal lines, GWP increased to £2.574 billion (2022: £2.466 billion), while commercial lines GWP increased to £1.674 billion (2022: £1.543 billion).
“It’s a great set of results generally,” Garrad said. “Very strong growth in GWP through a combination of rate actions and new business, and that applies equally across our personal lines, and our small business and [Global Corporate & Specialty] business.”
Feature image by iStock.com/takasuu
