Star insurance division hit by claims and lower investments
Churchill and Direct Line owner RBS insurance cut its operating profit by almost a third (31%) to £101m from £147m in Q1 due to losing Tesco Personal Finance, poor weather and lower investment income.
Financial highlights (2008Q1 in brackets)
- Earned premiums £1,356m (£1,382)
- Reinsurers' share £51m £61m
- Insurance premium income £1,305m (£1,321)
- Net fees and commissions paid £129m (£100m)
- Other income £144m (£169m)
- Total income £1,320m £1,390m
- Direct expenses £181m (£223m)
- Allocation of manufacturing costs £63m (£59m)
- Gross claims £981m (£1,041m)
- Reinsurers' share £11m (£80m)
- Net claims £970m (£961m
- Combined ratio 99.6% to 97.8%
- Operating profit before impairment losses £106m (£147)
- Operating profit £101m (£147)
Analysis of income by product:
- Motor own-brands £483m (£485m
- Household and Life own-brands £206m (£205m)
- Motor partnerships and broker £256m £334m
- Household and Life, Partnerships and broker £128m (£148m)
- Other (International, commercial and central) £247m (£218m)
RBS said it had good growth of 5% in its own-brand premium income as policy numbers continued to grow. In the UK motor market, the Churchill and Privilege brands continued to be successfully deployed on a limited number of aggregator web sites. Direct Line new business volumes increased by 20% and Churchill and Privilege motor policy numbers increased by 14% and 18%.
“In own-brand non-motor insurance we have continued to achieve good sales through RBS and NatWest, where home insurance policies in force have increased by 15% over the period. In addition, Direct Line home renewal volumes have increased by 2% across the same period and Privilege and Churchill have grown home policies by 165% and 20% respectively, mainly due to an increase in online business as a result of successful marketing campaigns. Overall own-brand non-motor policies in force have grown by 49% to 5.7m benefiting from the addition of rescue cover to RBS and NatWest current account package customers. On a like for like basis own-brand non-motor policies in force have grown by 5%.
Partnership and broker business continued to fall in line with previous trends with premium income declining 9%.
Other income fell 15% to £144m reflecting lower investment income as interest rates fell in the UK.
Net insurance claims rose by 1% to £970m, reflecting the impacts of more severe weather conditions in January 2009 balanced by further efficiencies and an improvement in risk selection.
Impairment losses of £5m reflect losses on the investment portfolio.