I wanted to follow up Steve Murrells’ message to all Co-op colleagues this morning with a specific update for Insurance as our first half results are published. Our performance in Insurance is solid, with premium growth ahead of plans and positive improvements to underlying profitability.
As Steve says, we’re now proving that our Co-op is a better and different way of doing business. From January to the end of June we returned millions to our members and championed their communities and the issues that matter most to them. Through the 5% reward, members have received a total of £29m, and through the 1% reward £6m has been raised making a difference to thousands of local causes.
Although Insurance does not currently take part in the 5+1 rewards, we are creating additional value for our members by offering a member price for motor insurance and by helping make communities safer. We’ve partnered with Neighbourhood Watch to give advice to members on protecting their property, and, with the road safety charity Brake, have been talking to pupils in our Co-op Academies and other high schools about staying safe on the road. We’ve also introduced the first Co-op Safe Used First Car Award to highlight the safety features all drivers should be aware of when buying their first car.
The big numbers
Our headline Insurance revenue was £164m (2016: £208m). This fall in revenue was expected following the purchase of additional reinsurance which helps support our capital position. If we look at “like with like” then revenue increased 12% over 2016.
Overall, whilst we have experienced lower reserve releases than in 2016, the underlying profitability of our Insurance business has improved reflecting increased rates, improved efficiency and the benefits of investment in pricing capabilities. The operating loss, which is after adjusting for one-off costs associated with the Transformation programme, was £11m (2016: loss of £4m).
For the last two years we’ve been working with IBM to upgrade our IT systems as part of the broader transformation of Co-op Insurance. The IT elements of this upgrade programme had been anticipated to deliver benefits for members and customers last year. We announced in our annual report that the delivery of this programme was delayed, and we have been talking with IBM about the future direction of the project. In July, the contract with IBM was terminated and we’re now considering alternative options for updating Co-op Insurance’s technology.
Creating value for members
Like all parts of our Co-op, our Insurance business is committed to creating value for our members in multiple ways. Our focus has been on making sure we remain competitive, within a highly competitive market, without sacrificing customer service or our leadership position on insurance ethics. We’ve also been developing relevant ways for the business to support local communities and address future insurance trends and challenges.
As well as our key partnerships with Neighbourhood Watch and Brake we’ve been focused on helping those communities most affected by flooding, setting up a flood response team from across the Co-op group of businesses to make sure we’re not only warning communities in advance, but, if storms do hit, making sure we are on the ground quickly and offering practical help and support. And, in the first half of the year, we’ve been working with a team of environmentalists from the University of Salford looking at the erosion of floodplains across the country but in particular in Cumbria.
As a result of this work we’ve taken action and launched a toolkit in Cumbria and nationally to help to prevent and respond to floods. We’ve also pledged to support the Eden Rivers Trust, a charity working to develop Natural Flood Management (NFM) as a more affordable solution to flood prevention.
We recognise that extreme weather in the UK is a likely consequence of global warming and because of that we’ve extended our carbon offset programme, which now offsets a proportion of our motor and home insurance customers’ carbon emissions as standard. This is a first for the industry in the UK with funds going to carbon reduction projects in Ghana and Kenya.
As you know, we’ve been celebrating our 150th anniversary and reflecting on past achievements and future ambitions. Our sales growth, underlying profit improvements and continuing innovations are down to you, our colleagues, and I’d like to thank you all for the hard work and dedication you’ve shown throughout the year.