Profits fell by nearly 28% in troubled banks first half of 2009

RBS Insurance saw turnover slip and pre-tax profits fall from £300m in the first half of last year to £217m this year, as the banking group edged back in to the black with a £15m profit despite reporting a £727m loss at the same time last year.

RBS Insurance (2008 in brackets)

  • Turnover £2,458m (£2,556m)
  • Pre-tax profit £217m (£300m)
  • Bancassurance and general insurance claims, after reinsurance, decreased by 3% to £2,134m.

In its insurance arm, RBS said that direct expenses improved by 4% to £260m, mainly driven by lower staff costs and reduced marketing spend.

Net claims were 2% higher at £1,551m due to increases in creditor claims, home claims relating to the very cold weather in the first quarter of 2009, and a rise in personal injury motor claims costs.

Gross written premium also increased by 2% over the period. Own-brand motor gross written premium increased by 10% year on year and own-brand home gross written premium increased by 11%.

The UK combined operating ratio for the first half of 2009, including manufacturing costs, rose to 95.3%, compared with 94.8% a year earlier, reflecting a higher loss ratio partly offset by an improved expense base.

The bank said: "For RBS Insurance, insurance premium income was stable at £2,140m, reflecting 4% growth in the group’s own brands offset by a 10% decline in the partnerships and broker segment. This reflects the division’s strategy of maximising profitability while focusing on growth in the group’s own-brand businesses. Investment income declined by 36% to £115 million, largely as a result of a year over year reduction in interest rates. The division has a very conservative investment policy for its £8.4bn of invested funds, with 84% in short duration deposits and fixed income bonds. Net fees and commissions payable were 7% lower, mainly as a result of lower sales of the creditor product. Operating profit in the first half was £217 million, a decline of £83 million or 28% from the first half of 2008, of which £71 million directly related to lower investment returns and impairment losses."

UK motor market

"In the UK motor market, the Churchill and Privilege brands continued to be successfully deployed on selected price comparison web sites. Direct Line, Churchill and Privilege motor policy numbers increased by 2%, 22% and 13% respectively over the period. In total, over previous year, own-brand motor policy numbers have increased by 8% to 4.8 million.

"In own-brand non-motor insurance RBS Insurance has continued to achieve strong sales through RBS and NatWest, where home insurance policies in force increased by 16%. Direct Line has achieved a 2% increase in the number of policy renewals in the period. In addition, Privilege and Churchill have grown home policies by 223% and 29% respectively, mainly due to successful entry onto price comparison websites. Overall own-brand non-motor policies in force have grown by 8% to 5.9 million."