24 May 1996

NFUMutual makes a small loss in face of extreme weather

By Philip Clarke

CLIMATIC extremes in 1995 left the UKs leading agricultural insurer, NFU Mutual, facing a small underwriting loss.

Income from premiums was down slightly to £328m, after rate cuts in an increasingly competitive market-place. And this was compounded by a significant rise in the value of claims to £187m.

"Four times the usual number of crop and combine fire claims were received," says chairman Alun Evans. "During a three-week period in August, our policyholders notified us of as many claims as we normally receive in six months.

"Extreme weather of the opposite kind affected us in the final few days of the year, when severe frost was followed by an extremely rapid thaw. That brought UK insur-ers an influx of burst-pipe claims."

After accounting for other costs and expenses, the parent society recorded a net underwriting loss of £5.7m compared with a £14.7m profit the previous year. "This is very small compared with the premium income," said a spokesman. "Our aim is to break even on the insurance side of the business." Cuts in premiums saved members £16.5m, it was claimed, but most of this was recouped by new business. And a stronger contribution from investment income let the parent society as a whole retain a profit of £69m after tax.

Given the current trading performance in UK agriculture, the Mutual has no plans to change premiums this year. But, given the potential for more claims in the area of public liability, the group has increased its reserves.

On the life assurance and pensions side, NFU Mutual Life has reported a 4% drop in revenue to £132m. But others fared worse as the market contracted by 15% in 1995 as new regulations on customer service added to the administrative burden. But this is still seen as a growth area. "It is clear that, in the next century, government will expect people to take much greater responsibility for their own financial welfare in retirement and the cost of care for long-term illness," said Mr Evans.

Stiffer competition in the general insurance market meant Avon Insurance made an underwriting loss of £1.4m on £138m of premiums. &#42

Blowing hot and cold: An underwriting profit in 1994 turned to an underwriting loss last year for the NFUMutual as field fires in the summer and frozen pipes in the winter forced up the number of claims.