Comparison of Solvency and Profitability Ratios of AFM Members Steve Dixon and Kathryn Moore of SDA llp AFM 2019 Conference
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Comparison of Solvency
and Profitability Ratios of
AFM Members
Steve Dixon and Kathryn Moore of SDA llp
AFM 2019 Conference
Overview
Aims of presentation
Information surveyed
Non-Life Company observations
Life Company observations
Aims of presentation
Share information with AFM members on solvency and expense ratios of firms
Compare information from last 3 years
Identify any observed trends over the period
Information surveyed:
36 companies
Report and Accounts• Profit & Loss account• Notes to the Accounts
2016, 2017 and 2018 year end
SFCR documents• Premium Claims and
Expenses• SCR/MCR• Own Funds
Information surveyed:Comparative information
Expenses Incurred
Split of Expenses – Acquisition, Admin, Staff
Investment Income and Expenses
Written/Earned Premium
Profitability
SCR split and Solvency Ratio
9 Savings Providers
5 Income Protection Providers
Expense information from Report and Accounts
Solvency information from SFCR
Comparisons shown between last three year-ends
AFM Savings and Income
Protection Providers:
Savings and IP Expenses
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
S1 2
01
6S1
20
17
S1 2
01
8
S2 2
01
6S2
20
17
S2 2
01
8
S3 2
01
6S3
20
17
S3 2
01
8
S4 2
01
6S4
20
17
S4 2
01
8
S5 2
01
6S5
20
17
S5 2
01
8
S6 2
01
6S6
20
17
S6 2
01
8
S7 2
01
6S7
20
17
S7 2
01
8
S8 2
01
6S8
20
17
S8 2
01
8
S9 2
01
6S9
20
17
S9 2
01
8
IP1
20
16
IP1
20
17
IP1
20
18
IP2
20
16
IP2
20
17
IP2
20
18
IP3
20
16
IP3
20
17
IP3
20
18
IP4
20
16
IP4
20
17
IP4
20
18
IP5
20
16
IP5
20
17
IP5
20
18
Split
of
Exp
ense
s
Split of Expense by Type
Acquisition Admin Staff
Acquisition Expenses
-150%
-50%
50%
150%
250%
S1 S2 S3 S4 S5 S6 S7 S8 S9 IP1 IP2 IP3 IP4 IP5
Change in Acquisition Expenses
16-17 Acquisition Change 17-18 Acquisition Change
-100%
-50%
0%
50%
100%
S1 S2 S3 S4 S5 S6 S7 S8 S9 IP1 IP2 IP3 IP4 IP5
2016-2017 Premium and Acquisition Expense Change
16-17 Acquisition Change 16-17 Premium Change
-60%
-10%
40%
90%
S1 S2 S3 S4 S5 S6 S7 S8 S9 IP1 IP2 IP3 IP4 IP5
2017-2018 Premium and Acquisition Expense Change
17-18 Acquisition Change 17-18 Premium Change
Economies of Scale?
0.00%
50.00%
100.00%
S3 S2 S9 S7 IP2 IP4 S4 S1 S5 IP5 IP1 S8 IP3 S6
2016 Expenses as % of Premium by Premium Scale (largest insurer on left)
2016 Expenses % of Premium
0.00%
50.00%
100.00%
S3 S2 S9 IP2 S5 S7 IP4 S4 IP1 IP5 S1 S8 IP3 S6
2017 Expenses as % of Premium by Premium Scale (largest insurer on left)
2017 Expenses % of Premium
0.00%
50.00%
100.00%
S3 S2 S5 IP2 S9 IP4 S7 S4 IP1 IP5 S1 S8 IP3 S6
2018 Expenses as % of Premium by Premium Scale (largest insurer on left)
2018 Expenses % of Premium
Administration Expenses
£0
£20
£40
£60
£80
£100
£120
£140
£160
£180
£200
S1 S2 S3 S5 S6 S7 S8 S9 IP1 IP2 IP3 IP5 AVG
2018 Average Admin Cost Per Member Excluding CTF
Avg Cost Per Member
Investment Performance
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
S1 S2 S3 S4 S5 S6 S7 S8 S9 IP1 IP2 IP3 IP4 IP5
Investment Expenses as % of Investment Income
2016 2017 2018
0.000%
0.200%
0.400%
0.600%
0.800%
S1 S2 S3 S4 S5 S6 S7 S8 S9 IP1 IP2 IP3 IP4 IP5
2016-2018 Investment Expense as % of FUM
2016 2017 2018
IP SCR Coverage
0%
100%
200%
300%
400%
IP1 IP2 IP3 IP4 IP5
Income Protection SCR Cover
2016 SCR Cover 2017 SCR Cover 2018 SCR Cover
-40%-20%
0%20%40%60%80%
100%
IP1
20
16
IP1
20
17
IP1
20
18
IP2
20
16
IP2
20
17
IP2
20
18
IP3
20
16
IP3
20
17
IP3
20
18
IP4
20
16
IP4
20
17
IP4
20
18
IP5
20
16
IP5
20
17
IP5
20
18
Income Protection Split of SCR by Risk Type
Market Risk Counterparty Default Risk Life UW Risk Health UW Risk
Non-Life UW Risk Diversification Loss-Absorbency Other
0%
100%
200%
300%
400%
S1 S2 S3 S4 S5 S6 S7 S8 S9
Life SCR Cover
2016 SCR Cover 2017 SCR Cover 2018 SCR Cover
Savings SCR Coverage
-50%
-30%
-10%
10%
30%
50%
70%
90%
S1 2
01
6
S1 2
01
7
S1 2
01
8
S2 2
01
6
S2 2
01
7
S2 2
01
8
S3 2
01
6
S3 2
01
7
S3 2
01
8
S4 2
01
6
S4 2
01
7
S4 2
01
8
S5 2
01
6
S5 2
01
7
S5 2
01
8
S6 2
01
6
S6 2
01
7
S6 2
01
8
S7 2
01
6
S7 2
01
7
S7 2
01
8
S8 2
01
6
S8 2
01
7
S8 2
01
8
S9 2
01
6
S9 2
01
7
S9 2
01
8
Savings Split of SCR by Risk Type
Market Risk Counterparty Default Risk Life UW Risk Health UW Risk
Non-Life UW Risk Diversification Loss-Absorbency Other
SCR Coverage and Expenses
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
S1 2
016
S1 2
017
S1 2
018
S2 2
016
S2 2
017
S2 2
018
S3 2
016
S3 2
017
S3 2
018
S4 2
016
S4 2
017
S4 2
018
S5 2
016
S5 2
017
S5 2
018
S6 2
016
S6 2
017
S6 2
018
S7 2
016
S7 2
017
S7 2
018
S8 2
016
S8 2
017
S8 2
018
S9 2
016
S9 2
017
S9 2
018
IP1
2016
IP1
2017
IP1
2018
IP2
2016
IP2
2017
IP2
2018
IP3
2016
IP3
2017
IP3
2018
IP4
2016
IP4
2017
IP4
2018
IP5
2016
IP5
2017
IP5
2018
Solv
ency
Rat
io
Split
of
Exp
ense
s
Split of Expense by Type and SCR Coverage
SCR Ratio Acquisition Admin Staff
Board Expenses
0.00%
10.00%
20.00%
IP4 IP2 IP5 S2 IP1 IP3 S3 S6 S5 S4 S9 S7 S8
2016 Board Expenses % of Total (largest insurer on left)
2016 Board Expenses % of Total
0.00%
10.00%
20.00%
IP4 IP2 IP5 S2 IP1 IP3 S3 S6 S4 S5 S9 S7 S8
2017 Board Expenses % of Total (largest insurer on left)
2017 Board Expenses % of Total
0.00%
10.00%
20.00%
IP4 IP2 IP5 S2 IP1 IP3 S3 S6 S5 S4 S9 S7 S8
2018 Board Expenses % of Total (largest insurer on left)
2018 Board Expenses % of Total
AFM General Insurers:
6 Cash Plans
3 additional Non-Life Companies
Expense information from Report and Accounts
Solvency information from SFCR
Comparisons shown between last three year-ends
GI Earned Premium
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
CP1 CP2 CP3 CP4 CP5 CP6 NL1 NL2 NL3
Earn
ed P
rem
ium
£0
00
's
GI Earned Premium 2016-2018
2016 EP 2017 EP 2018 EP
GI Profitability
-30,000
-10,000
10,000
30,000
50,000
70,000
90,000
110,000
130,000
150,000
CP
1 1
6
CP
1 1
7
CP
1 1
8
CP
2 1
6
CP
2 1
7
CP
2 1
8
CP
3 1
6
CP
3 1
7
CP
3 1
8
CP
4 1
6
CP
4 1
7
CP
4 1
8
CP
5 1
6
CP
5 1
7
CP
5 1
8
CP
6 1
6
CP
6 1
7
CP
6 1
8
NL1
16
NL1
17
NL1
18
NL2
16
NL2
17
NL2
18
NL3
16
NL3
17
NL3
18
-20%
0%
20%
40%
60%
80%
100%
Claims Expenses UW Profit
GI SFCR Expense Ratios
-
0.10
0.20
0.30
0.40
0.50
0.60
0.70
CP1 CP2 CP3 CP4 CP5 CP6 NL1 NL2 NL3
2016-2018 Expense ratios SFCR
2016 Expense Ratio 2017 Expense Ratio 2018 Expense Ratio
Cash Plan Average Non-Life Average
GI R&A Expense Ratios
-
0.10
0.20
0.30
0.40
0.50
0.60
0.70
CP1 CP2 CP3 CP4 CP5 CP6 NL1 NL2 NL3
2016-2018 Expense Ratios Report & Accounts
2016 Expense Ratio 2017 Expense Ratio 2018 Expense Ratio
Cash Plan Average Non-Life Average
GI Split of Expenses
0%
20%
40%
60%
80%
100%
CP
1 1
6
CP
1 1
7
CP
1 1
8
CP
2 1
6
CP
2 1
7
CP
2 1
8
CP
3 1
6
CP
3 1
7
CP
3 1
8
CP
4 1
6
CP
4 1
7
CP
4 1
8
CP
5 1
6
CP
5 1
7
CP
5 1
8
CP
6 1
6
CP
6 1
7
CP
6 1
8
NL1
16
NL1
17
NL1
18
NL2
16
NL2
17
NL2
18
NL3
16
NL3
17
NL3
18
Split of Expenses by Type
Acquisition Admin Staff
0%
10%
20%
30%
40%
CP
1 1
6
CP
1 1
7
CP
1 1
8
CP
2 1
6
CP
2 1
7
CP
2 1
8
CP
3 1
6
CP
3 1
7
CP
3 1
8
CP
4 1
6
CP
4 1
7
CP
4 1
8
CP
5 1
6
CP
5 1
7
CP
5 1
8
CP
6 1
6
CP
6 1
7
CP
6 1
8
NL1
16
NL1
17
NL1
18
NL2
16
NL2
17
NL2
18
NL3
16
NL3
17
NL3
18
Expenses as % of Premium
Acquisition Admin Staff
GI Acquisition Expenses
0%5%
10%15%20%25%30%
CP
1 1
6
CP
1 1
7
CP
1 1
8
CP
2 1
6
CP
2 1
7
CP
2 1
8
CP
3 1
6
CP
3 1
7
CP
3 1
8
CP
4 1
6
CP
4 1
7
CP
4 1
8
CP
5 1
6
CP
5 1
7
CP
5 1
8
CP
6 1
6
CP
6 1
7
CP
6 1
8
NL1
16
NL1
17
NL1
18
NL2
16
NL2
17
NL2
18
NL3
16
NL3
17
NL3
18
Acquisition % of Premium
-50%
-30%
-10%
10%
30%
50%
CP1 CP2 CP3 CP4 CP5 CP6 NL1 NL2 NL3
2016-2017
16-17 Acquisition Change 16-17 Premium Change
-50%
-30%
-10%
10%
30%
50%
CP1 CP2 CP3 CP4 CP5 CP6 NL1 NL2 NL3
2017-2018
17-18 Acquisition Change 17-18 Premium Change
0%
10%
20%
30%
40%
CP
1 1
6
CP
1 1
7
CP
1 1
8
CP
2 1
6
CP
2 1
7
CP
2 1
8
CP
3 1
6
CP
3 1
7
CP
3 1
8
CP
4 1
6
CP
4 1
7
CP
4 1
8
CP
5 1
6
CP
5 1
7
CP
5 1
8
CP
6 1
6
CP
6 1
7
CP
6 1
8
NL1
16
NL1
17
NL1
18
NL2
16
NL2
17
NL2
18
NL3
16
NL3
17
NL3
18
Staff % of Premium
0.21 0.39
2.17
-
0.50
1.00
1.50
2.00
2.50
Acquisition % TotalExpense
Staff % TotalExpense
SCR Cover
2018 High Staff Cost Insurer Average Expenses and SCR Cover
0.46 0.23
1.78
-
0.50
1.00
1.50
2.00
2.50
Acquisition % TotalExpense
Staff % TotalExpense
SCR Cover
2018 High Aquisition Insurer Average Expenses and SCR Cover
GI Staff Expenses
GI Investment Performance
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
CP1 CP2 CP3 CP4 CP5 CP6 NL1 NL2 NL3
Investment Income % of Investment Assets
2016 2017 2018
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
CP1 CP2 CP3 CP4 CP5 CP6 NL1 NL2 NL3
Investment Expenses % of Investment Income
2016 2017 2018
Expenses and Solvency Ratio
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Expense % Solvency Ratio
2017-2018 Change in Expenses and Solvency Ratio
CP1 CP2 CP3 CP4 CP5
CP6 NL1 NL2 NL3
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Expense % Solvency Ratio
2016-2017 Change in Expenses and Solvency Ratio
CP1 CP2 CP3 CP4 CP5
CP6 NL1 NL2 NL3
Solvency Capital Requirement
-20%
0%
20%
40%
60%
80%
100%
SCR Split by Risk Type
(10,000)
(5,000)
-
5,000
10,000
15,000
20,000
25,000
30,000
CP
1 1
6
CP
1 1
7
CP
1 1
8
CP
2 1
6
CP
2 1
7
CP
2 1
8
CP
3 1
6
CP
3 1
7
CP
3 1
8
CP
4 1
6
CP
4 1
7
CP
4 1
8
CP
5 1
6
CP
5 1
7
CP
5 1
8
CP
6 1
6
CP
6 1
7
CP
6 1
8
NL2
16
NL2
17
NL2
18
NL3
16
NL3
17
NL3
18
Market Risk Counterparty Default Risk Life UW Risk Health UW Risk
Non-Life UW Risk Diversification Loss-Absorbency Other
-
20,000
40,000
60,000
80,000
CP1 CP2 CP3 CP4 CP5 CP6 NL2 NL3
Own Funds
2016 2017 2018
Solvency Capital Requirement
-
1.00
2.00
3.00
4.00
5.00
CP1 CP2 CP3 CP4 CP5 CP6 NL2 NL3
Solvency Ratio
2016 2017 2018
-
10,000.00
20,000.00
30,000.00
CP1 CP2 CP3 CP4 CP5 CP6 NL2 NL3
SCR
2016 2017 2018
What now?
Am I getting value from my
acquisition spend?
Should I look for ways to cut costs without affecting
customer experience?
How do I plan my growth and the infrastructure
necessary?
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