I’m thrilled to sit down with Simon Glairy, a renowned expert in insurance and Insurtech, whose deep insights into risk management and AI-driven risk assessment have shaped industry perspectives. Today, we’ll dive into the latest financial performance and strategic moves of a leading insurer, exploring how their focus on capital-light businesses, regional growth, and key acquisitions are driving impressive results. We’ll discuss the factors behind their profit surge, the significance of their dividend increases, and the challenges and opportunities in various markets.
Can you explain what’s driving the 22% increase in operating profit to £1.07 billion for the first half of 2025?
Certainly, Olivia. This kind of growth is a testament to a well-executed strategy. The primary driver seems to be a pivot toward capital-light businesses, which now account for two-thirds of operating profit. These areas, like wealth management and certain insurance lines, require less capital investment while delivering strong returns. Additionally, disciplined cost management and robust sales growth across insurance, wealth, and retirement—up 9% to £21.5 billion—have played a big role. It’s also worth noting the operational efficiencies reflected in metrics like the improved combined operating ratio.
How important is it that capital-light businesses are contributing so significantly to overall profits?
It’s a game-changer. Capital-light businesses allow a company to generate profit without tying up large amounts of capital in risk-heavy areas. This shift to 66% of profits from such segments means the insurer can maintain financial flexibility, invest in growth opportunities, and return value to shareholders through dividends or buybacks. It also strengthens their Solvency II metrics, which are critical for regulatory confidence and investor trust, as seen with their shareholder cover ratio holding steady at 206%.
What strategies do you think are behind the 20% rise in Solvency II Own Funds Generation and the 33% increase in Operating Capital Generation?
These improvements point to a multi-pronged approach. First, there’s likely a focus on optimizing capital allocation—directing resources to high-return, low-risk areas. Second, the growth in operating capital generation suggests they’re enhancing underwriting discipline and pricing strategies, especially in general insurance where premiums grew 7%. Finally, operational efficiencies, like streamlining claims processes or leveraging technology, are probably freeing up capital while maintaining strong risk buffers.
Turning to shareholder returns, what does the jump in Solvency II return on equity to 16.7% tell us about the company’s performance?
This is a strong signal of how effectively the company is using its equity to generate returns under the Solvency II framework. The increase from 12.4% last year shows they’re not just growing profits but doing so in a way that maximizes value for shareholders. It reflects better risk management, improved profitability in key segments, and perhaps a more favorable balance between capital holdings and risk exposure. It’s a metric that investors watch closely because it indicates sustainable growth potential.
The interim dividend also rose by 10% to 13.1p per share. What message does this send about financial confidence?
It’s a clear statement of confidence in both current stability and future prospects. A 10% hike in dividends signals that the leadership believes cash flows are robust enough to reward shareholders while still funding growth initiatives. With liquidity at £2.1 billion and strong capital generation, they’re showing they can balance reinvestment with shareholder returns—a key marker of a mature, well-managed insurer.
Looking at segment performance, what do you think contributed most to the 9% sales growth in insurance, wealth, and retirement to £21.5 billion?
This growth likely stems from a combination of market demand and strategic focus. Wealth management probably saw significant inflows—net flows were up 16% to £5.8 billion—driven by an aging population seeking retirement solutions and strong performance in asset management. Health premiums also jumped 14%, reflecting increased consumer focus on protection. In insurance, targeted product offerings and partnerships, like the travel deal in the UK, seem to have boosted uptake across personal and commercial lines.
General insurance premiums grew by 7% to £6.29 billion. How might pricing and underwriting have influenced this result?
Pricing discipline and underwriting actions are almost certainly at the core of this. In a competitive market, insurers often face pressure to lower premiums, but a 7% increase suggests they’ve successfully implemented rate hikes without losing volume. This is especially evident in commercial lines, where growth was stronger. Underwriting discipline—carefully selecting risks and adjusting portfolios—also helps maintain profitability, as seen in the improved combined operating ratio of 94.6% on an undiscounted basis.
Speaking of regional results, what’s fueling the 9% growth in general insurance premiums to £4.14 billion in the UK and Ireland?
Several factors are at play here. In personal lines, growth of 3% appears tied to intermediated channels and strategic partnerships that expand reach. Commercial lines, with a 15% jump, likely benefited from pricing adjustments and new business wins, alongside acquisitions that bolstered market presence. The region’s economic stability and demand for tailored insurance products also create a fertile ground for such consistent growth.
In contrast, Canada saw a 2% dip in premiums to £2.15 billion. How can challenges like severe weather events be addressed in such markets?
Severe weather events, which have pressured claims costs in Canada, are a growing challenge for insurers globally. To address this, companies often tighten underwriting criteria, focusing on risk selection to avoid overexposure in vulnerable areas. They might also invest in predictive analytics and AI-driven tools to better forecast weather-related losses. Reinsurance arrangements can help spread risk, and adjusting pricing to reflect higher claims potential is critical, though it must be balanced to retain customers.
Finally, what is your forecast for the insurance industry’s focus on capital-light strategies over the next few years?
I believe the shift toward capital-light strategies will accelerate. As regulatory pressures like Solvency II remain stringent, insurers will prioritize business lines that deliver high returns with lower capital demands. Technology, especially AI for risk assessment and automation, will play a bigger role in enabling this transition by improving efficiency and reducing operational costs. We’re likely to see more insurers doubling down on wealth, health, and selective insurance segments, while managing risk exposure in traditional, capital-intensive areas. It’s a trend that balances growth with resilience, and I expect it to shape strategic priorities for the foreseeable future.
