U K Insurance Limited (UKI) is one of the two regulated insurers within the Direct Line Group (DLG), the other being Churchill Insurance Company Limited (CIC). DLG and its group of companies provide motor, home, rescue and other personal lines and commercial insurance products.

Balance Sheet Overview

The majority of UKI’s assets (left col) are in debt instruments (bonds and loans) with some investment property. UKI also makes use of reinsurance and derivatives for derisking purposes.

Balance Sheet – U K Insurance Ltd

On the liability side (right col), the declared dividend of £198m jumps out on the Own Funds side. This indicates that the cash position post distributions will drop down to £20m from £218m, so liquidity risk is something to keep an eye on.

The other interesting aspect that jumps out is the technical provision of £669m for life risk, these are effectively annuities from non-life insurance contracts – whiplash claims – that make a non-life insurance product behave like a life product.

Performance by Lines of Business

The following illustration summarises the performance by Solvency II lines of business for non-life products by looking at the loss ratio and combined ratio. Annuities from non-life contracts are not included.

Performance by LoB – U K Insurance Ltd
  • Income protection: includes cover in the event of being unable to continue working.
  • Motor vehicle: includes cover against third-party property damage and bodily injury liability cover.
  • Other motor: includes cover against accidental damage, fire, theft and windscreen damage.
  • Fire and Property damage: includes cover against accidental damage, escape of water, fire, subsidence, theft and weather (including storms and flooding).
  • General liability: includes cover against personal accident, employers’ liability, public liability for injury, public liability to property and disease.
  • Legal expenses: includes motor legal protection and family legal protection, including for employment disputes and personal injury.
  • Assistance: inculdes motor rescue, car hire and travel (including cancellation, medical and non-medical expenses).
  • Miscellaneous financial loss: includes creditor protection for unemployment, pet, including veterinary fees, home response and emergency, pecuniary loss for business interruption and commercial special risks.

Investments Overview

The investment portfolio really leans into the Corporate bonds with an 80% allocation towards that asset class. Somewhat expected given the low returns from government bonds.

Investments – U K Insurance Ltd

No currency risk suggests all investments are in GBP (UK), so a little surprised to see how £4.2bn has been deployed in the UK Corps without creating any concentration risk. The market risk diversification seems a little on the high side given 80% of the investment portfolio is in one asset class. I suspect there is diversification between the Spread and Credit risk but most likely there is more going on in UKIs Internal Model.

Solvency Assessment

The Solvency position looks healthy, which would explain the c.£200m dividend. In addition to that, it’s worth noting that UKI makes use of a Full Internal Model and Volatility Adjustment available under Solvency II.

Solvency Assessment - U K Insurance Ltd
Solvency Assessment – U K Insurance Ltd


All views and analyses presented in this post are for educational purposes only. CoVi Analytics does not take any responsibility for the accuracy of the illustration(s) provided above. If you wish to use these illustrations, you may do so, provided you attribute CoVi Analytics in your reproduction or re-use of these illustrations. All opinions expressed in this post are that of the author and author’s alone.

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