Royal Bank of Scotland Insurance's combined ratio climbed four points higher to 92.7% for the first six months of 2004, according to the company's interim results.

A company statement said: "The UK combined ratio, which includes manufacturing costs, was 92.7% compared with 91.2% for the full year 2003. Excluding Churchill, the UK ratio improved from 89.1% for the first half of 2003 to 89%."

Royal Bank of Scotland's half-yearly figures showed the effect of the integration of Churchill, as the bank's insurance division said its expenses increased by 58%, or £111m, to £301m. The figures also recorded huge increases in both premium income, up 105% to £2.4bn, and net claims, up 106% to £1.7bn, as the Churchill and Direct Line figures were amalgamated.

Contribution of RBS Insurance was boosted by 55%, or £140m, to £395m over the first six months.

Group chief executive Fred Goodwin said: "As a result of organic growth in Direct line and the acquisition of Churchill, RBS Insurance increased the numbers of its in-force motor and home insurance policies, which both grew by 3.5 million since June 2003.

"Excluding Churchill, which was acquired in September, RBS Insurance increased its income by 17% and its contribution by 13%"

Overall the market reacted poorly to RBS Group figures, at one point losing 63p, or 4%, on the day's trading (Tuesday). This was despite the bank announcing a 17% increase in profits to £3.4bn, in line with expectations. A market analyst said: "I think a 4% drop is a pretty significant suggestion of low appreciation rather than low confidence. You have to beat expectations to get an upgrade."