Royal and Sun profits climb 24 per cent

17-08-2006

Insurer Royal & Sun Alliance (R&SA) has reported a 24 per cent rise in first-half profits, with its performance boosted by favourable weather claims and actions to lower costs.

The company said that its operating result was £409 million, while profit before disposals and pension scheme changes increased to £333 million, representing a rise of 41 per cent compared to the same period in 2005.

Pre-tax profits were up by a more modest 11 per cent to £329 million for the six months to June 30th, compared to £296 million last year.

Net premium income across the group increased by two per cent to £2.83 billion.

The UK's second-largest general insurer said that its combined ratio, a key measure of underwriting profitability, improved from 92.8 per cent to 91.7 per cent.

R&SA said that the UK remained its most competitive market but stressed that by focusing on retaining customers it was "building good momentum" across the business. It said it remained committed to retaining prices through "underwriting discipline."

Across the UK, underwriting profits increased by 20 per cent to £95 million. Although net written premiums fell from £1.4 billion to £1.3 billion year-on-year, they were up 12 per cent in the second quarter on the first three months of 2006.

R&SA said that it had continued to achieve double digit growth across its international operations, with a 17 per cent rise in premiums driven by strong performances in the Latin American and Canadian markets, where premiums grew by 47 per cent and 25 per cent respectively.

The insurer said that it was continuing to make good progress in the US, where it has suffered heavy losses due to escalating claims in recent years. R&SA said that its US operations had produced profits of £6 million over the first six months of the year, compared to a £24 million loss reported a year ago.

It said that actions taken over the last three years had "significantly reduced" R&SA's exposure in the US market, which was expected to "broadly breakeven in 2006".

Meanwhile, the company, which recently announced plans to cut 1,500 jobs, said that it had achieved identified savings of £270 million ahead of schedule and hoped to reduce costs by a further £130 million a year by 2008.

Commenting, R&SA group chief executive Andy Haste said: "It has been a good first half with a strong result from the core group and further progress in the US."

"We continue to deliver against our strategic objectives and are building good momentum for the future," he added.


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