Royal Bank of Scotland Insurance boost reserves by half a billion and scales back taxi, fleet and NIG drivers

Royal Bank of Scotland Insurance suffered a £295m in 2010, following a year of reserve strengthening for bodily injury claims and severe winter weather.

RSB described 2010 as a 'disappointing year' in its financial statements released today, as it fell into the red compared to a £58m profit in 2009.

Combined operating ratio worsened from 106% to 115%.

The bank-owned insurer strengthened reserves by £529m to £7.56bn in 2010 compared to 2009, to pay for prior year claims, including Periodic Payment Orders.

Gross written premiums declined from £4.48bn in 2009 to £4.29bn in 2010.

RBSI said it had cleansed its book of higher risk drivers by scaling back fleet and taxi business, and placing NIG’s personal lines book into run-off.

Chief executive Paul Geddes said: “We have emerged from 2010 more focused and stronger. I am encouraged by our performance in the final quarter. 2011 will be another demanding year, but the business is now in fundamentally good shape and I am optimistic about the future.”

Fourth quarter 2010

In a bright spot for RBSI, which includes Direct Line, Churchill and broker only insurer NIG, the fourth quarter's operating losses declined compared to the third quarter of 2010.

Operating losses declined from £33m in the third quarter to £9m in the fourth quarter, that was despite the severe weather in the UK, which led to claims of more than £100m above the average for the period.

Futhermore, there was also no strengthening of motor reserves in the fourth quarter, unlike the third quarter which underwent a £100m boost.

Excluding the impact of weather and other one-off items, RBSI’s fourth quarter result was a profit in the region of £75 million.

Highlights at a glance in 2010

Earned premiums £4.46bn(2010)/£4.52bn(2009)

Net claims £3.96bn/£3.63bn

Underwriting profit £131m/£520m

Operating (loss)/profit (£295m)/£58m

Combined operating ratio 115%/106%

Highlights at a glance in fourth quarter compared to third quarter

Earned premiums £1.10bn/£1.11

Net claims £906m/£949m

Underwriting profit £91m/£67m

Operating (loss)/profit £9m/£33m

Combined opearting ratio 114%/110%