Ratios for AFM Members Kathryn Moore and Steve Dixon of SDA llp - - PowerPoint PPT Presentation

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Ratios for AFM Members Kathryn Moore and Steve Dixon of SDA llp - - PowerPoint PPT Presentation

Jul 18, 2023 217 likes •485 views

Comparative Expense Ratios for AFM Members Kathryn Moore and Steve Dixon of SDA llp AFM 2018 Conference Overview Aims of presentation Information surveyed Non-Life observations Life observations Aims of presentation Share information with

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SLIDE 1

Comparative Expense Ratios for AFM Members

Kathryn Moore and Steve Dixon of SDA llp AFM 2018 Conference

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SLIDE 2

Overview

Aims of presentation Information surveyed Non-Life observations Life observations

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SLIDE 3

Aims of presentation

Share information with AFM members on level of expense ratios

  • f similar firms

Discuss trends over last two years Show results by sector Suggest possible areas of further investigation

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SLIDE 4

Information surveyed:

29 companies

Report and Accounts

  • Profit & Loss account
  • Notes to the accounts

2016 and 2017 year ends SFCR documents

  • Premium Claims and

Expenses

  • SCR/MCR
  • Own Funds
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SLIDE 5

Information surveyed:

Comparative information

Written/Earned Premium Claims Incurred Expenses Incurred Split of Expenses (acquisition/ongoing) Investment Expenses and Income Link with Own Fund and Solvency

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SLIDE 6

AFM General Insurers:

7 Cash Plan Providers 4 additional Non-Life Insurers Expense information from Report and Accounts Solvency information from SFCR Comparisons shown between last two year-ends

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SLIDE 7

GI Earned Premium

  • 20,000

40,000 60,000 80,000 100,000 120,000 140,000 160,000 CP1 CP2 CP3 CP4 CP5 CP6 CP7 NL1 NL2 NL3 NL4

Earned Premium £000's

General Insurer Earned Premium 2016/2017

2016 Earned Premium 2017 Earned Premium

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SLIDE 8

GI Claims and Expenses

  • 20,000
  • 20,000

40,000 60,000 80,000 100,000 120,000 140,000 160,000 CP1 16 CP1 17 CP2 16 CP2 17 CP3 16 CP3 17 CP4 16 CP4 17 CP5 16 CP5 17 CP6 16 CP6 17 CP7 16 CP7 17 NL1 16 NL1 17 NL2 16 NL2 17 NL3 16 NL3 17 NL4 16 NL4 17

Claims/Expense/Profit £000's

General Insurer Profitability

Claims Expense Underwriting Profit

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SLIDE 9

GI Ratios

  • 20%

0% 20% 40% 60% 80% 100% 120% CP1 16 CP1 17 CP2 16 CP2 17 CP3 16 CP3 17 CP4 16 CP4 17 CP5 16 CP5 17 CP6 16 CP6 17 CP7 16 CP7 17 NL1 16 NL1 17 NL2 16 NL2 17 NL3 16 NL3 17 NL4 16 NL4 17

General Insurers Profitability Ratios

Claims% Expense% UWP%

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SLIDE 10

GI Expense Ratios

0% 10% 20% 30% 40% 50% 60% CP1 CP2 CP3 CP4 CP5 CP6 CP7 NL1 NL2 NL3 NL4

2016 and 2017 Expense Ratios

2016 Expense Ratio 2017 Expense Ratio Cash Plan Average Expense Ratio Non-Life Average Expense Ratio

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SLIDE 11

GI Expenses split by Type

5000 10000 15000 20000 25000 30000 CP1 16 CP1 17 CP2 16 CP2 17 CP3 16 CP3 17 CP4 16 CP4 17 CP5 16 CP5 17 CP6 16 CP6 17 CP7 16 CP7 17 NL1 16 NL1 17 NL2 16 NL2 17 NL3 16 NL3 17 NL4 16 NL4 17

Expenses £000's

Expenses by Type

total expenses acquisition costs administrative expenses staff costs 0% 20% 40% 60% 80% 100% CP2 16 CP2 17 CP3 16 CP3 17 CP4 16 CP4 17 CP6 16 CP6 17 CP7 16 CP7 17 NL3 16 NL3 17 NL4 16 NL4 17

Acquisition Costs/Admin Costs split

acquisition costs administrative expenses

  • 10%

10% 30% 50% 70% 90% CP1 16 CP1 17 CP2 16 CP2 17 CP3 16 CP3 17 CP4 16 CP4 17 CP5 16 CP5 17 CP6 16 CP6 17 CP7 16 CP7 17 NL1 16 NL1 17 NL2 16 NL2 17 NL3 16 NL3 17 NL4 16 NL4 17

Staff Costs vs Non Staff Costs (as % of Total)

staff costs non staff costs

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GI Investment Expenses

10000 20000 30000 40000 50000 200 400 600 800 CP1CP2CP3CP4CP5CP6CP7NL1NL2NL3NL4

Invezstment Expenses £000's Investment Income £000's

Investment Income vs Investment Expenses

Investment Expenses 17 Investment Income 17 0% 10% 20% 30% 40% 10000 20000 30000 40000 50000 CP1CP2CP3CP4CP5CP6CP7NL1NL2NL3NL4

Inv Expenses as % Inv Income Investment Income £000's

Investment Income vs Inv Expenses as % Income

Investment Income 17 Exp as % income 17 1000 2000 3000 4000 5000 6000 100 200 300 400

IInvestment Income (£k) Investment Expenses (£k)

2017 Investment Income vs Investment Expenses

2000 4000 6000

Investment Income Investment Expenses as % of Income

2017 Investment Income vs Inv Expenses % Income

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GI Impact on Own Funds

0% 20% 40% 60% 80% 100% 120% 140% CP1 CP2 CP4 CP5 CP6 CP7 NL1 NL2 NL3 NL4

Total Operating Expenses as a % of Excess Own Funds

2016 2017

  • 40%
  • 30%
  • 20%
  • 10%

0% 10% 20% 30% Expense % Solvency Ratio

% change in expenses and Solvency Ratios

CP1 CP2 CP3 CP4 CP5 CP6 CP7 NL1 NL2 NL3 NL4

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SLIDE 14

AFM Income Protection Providers:

7 Providers Expense information from Report and Accounts Solvency information from SFCR Similar measures used as for General Insurers (Loss Ratios and Expense Ratios)

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SLIDE 15

IP Loss and Expense Ratios and Premium

  • 5,000

10,000 15,000 20,000 IP1 IP2 IP3 IP4 IP5 IP6 NDIP

Health Business Premiums

2016 2017

Premiums £000

0% 50% 100% 150% IP1 IP2 IP3 IP4 IP5 IP6 NDIP

Health Loss Ratio 16/17

2016 2017 0% 25% 50% 75% 100% IP1 IP2 IP3 IP4 IP5 IP6 NDIP

Health Expense Ratio 16/17

2016 2017

Loss Ratio Expense Ratio

0% 100% 200% 300% IP1 IP2 IP3 IP4 IP5 IP6 NDIP

Health Combined Ratio 16/17

2016 2017

Combined Ratio

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SLIDE 16

Underwriting profit

  • 150%
  • 100%
  • 50%

0% 50% 100% 150% 200% 250% IP1 16 IP1 17 IP216 IP217 IP3 16 IP3 17 IP4 16 IP4 17 IP5 16 IP5 17 IP6 16 IP6 17 IP7 16 IP7 17

Health Profitability

Loss Ratio % Expense Ratio % UWP %

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SLIDE 17

Acquisition Expenses as % of premium

0% 10% 20% 30% 40% 50% 60% 70% 80% IP1 IP2 IP3 IP4 IP5 IP6 NDIP

Acquisition Expenses as % Premiums

2016 2017

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SLIDE 18

Acquisition as % of expenses

0% 20% 40% 60% 80% 100% 120% IP1 16 IP1 17 IP216 IP217 IP3 16 IP3 17 IP4 16 IP4 17 IP5 16 IP5 17 IP6 16 IP6 17 IP7 16 IP7 17

Split of Expenses Acquisition/Administration

Acq % Admin %

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AFM Savings Providers:

11 Providers Expense information from Report and Accounts Solvency information from SFCR

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SLIDE 20

Funds under management

50 100 150 200 250 300 350 400 450 Save 1 16 Save 1 17 Save 2 16 Save 2 17 Save 3 16 Save 3 17 Save 4 16 Save 4 17 Save 5 16 Save 5 17 Save 6 16 Save 6 17 Save 7 16 Save 7 17 Save 8 16 Save 8 17 Save 9 16 Save 9 17 NDSave10 16 NDSave10 17 NDSave11 16 NDSave11 17

£m

Funds Under Management (split Unit-Linked and Non Unit-Linked)

Non Unit-Linked Unit-Linked

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SLIDE 21

Total expenses as % funds

0% 5% 10% 15% 20% Save1 Save2 Save3 Save4 Save5 Save6 Save7 Save8 Save9 NDSave10 NDSave11

Total Expenses as % FUM

2016 2017 0% 5% 10% 15% 20%

Total Expenses as % Non UL FUM

2016 2017

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Written premiums and Expenses

5 10 15 20 25 30 35 40 Save 2 16 Save 2 17 Save 3 16 Save 3 17 Save 4 16 Save 4 17 Save 5 16 Save 5 17 Save 6 16 Save 6 17 Save 7 16 Save 7 17 Save 8 16 Save 8 17 Save 9 16 Save 9 17 NDSave10 16 NDSave10 17 NDSave11 16 NDSave11 17

Written Premium £m

Written Premium including Expenses

Expenses Premium Less Expenses

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SLIDE 23

New APE and Acquisition costs as % APE

2 4 6 8 Save2 Save3 Save4 Save5

APE NB £m

APE New Business

2016 2017 0% 100% 200% 300% 400% 500% Save2 Save3 Save4 Save5

Acquisition costs as % of APE

2016 2017

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Professional Fees

0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% Save1 Save2 Save3 Save4 Save5 Save6 Save7 Save8 Save9 NDSave10NDSave11

Professional Fees as a % Non Unit-Linked Funds Under Management

2016 2017

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Key Takeaways

Useful to Benchmark yourself against competitors Need to allow for differences in Business Model Managing expenses is important in a competitive market – you achieve what you measure Expenses cannot be considered in isolation