Royal Bank of Scotland Insurance (RBSI) made an operating profit of £67m in the first quarter of 2011 compared with a £50m loss in the same period last year.
However, the company is still losing money from underwriting – though less than previous quarters. Its combined operating ratio for the quarter was 106% compared with 116% in the same quarter last year and 119% in the fourth quarter last year.
The result marks a return to profit for the insurance group – it made an operating loss of £9m in the fourth quarter of 2010 and a £295m loss for the full year. The company had to strengthen its reserves several times in 2010 against rising bodily injury claims in personal lines motor.
RBS said its insurance arm’s return to profitability was expected and attributed the improvement to the effects of its corrective underwriting actions. New pricing models and business selection criteria were the main drivers of the turnaround, it said, coupled with early benefits from new claims processes.
The bulk of the operating profit - £64m - was made up of investment income. RBSI reported a small technical profit (operating profit excluding investment income) of £3m for Q1 2011, compared with a £101m loss in the same period last year.
RBSI wrote gross premiums of £1.04bn in Q1 2011, down 5% on the £1.09bn in wrote in the same quarter last year. The company attributed the decline to the reduction in risk of its UK motor book throughout 2010 and into 2011 and the exit of the motor broker business.
RBSI Q1 2011 highlights in £m (compared with Q1 2010)
- Gross written premium:1,037 (1,090)
- Net claims: 784 (966)
- Technical result: +3 (-101)
- Investment income: 64 (51)
- Combined ratio: 106% (116%)
- Operating profit: +67 (-50)
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