The results season is over so who performed best? Michael Faulkner compares the results of five of the UK's biggest general insurers

Royal & SunAlliance (R&SA) is the star performer among the major UK insurers, a comparison of the 2004 financial results reveals.

With the year-end results now published for all major UK insurers, R&SA reported a 405% increase in its profits for 2004, eclipsing the performance of its rivals.

Only AXA came close, turning a £13.2m post-tax loss in 2003 into a £41m profit, equivalent to a 315% increase in profits.

Royal Bank of Scotland Insurance (RBSI) reported a mixed performance. Its combined ratio deteriorated by 2.5 percentage points (91.2% in 2003 to 93.7% in 2004),

The ratio of its profits to income fell 53%, from 36% in 2003 to 17% due to the relatively slow growth of profits in relation to premium income.

Nonetheless, RBSI managed a healthy 42% increase in profits overall. Moreover, RBSI is still ahead of its main rivals in terms of combined ratio, although its lead has slipped considerably since last year - it is now only 0.3 percentage points ahead of its nearest rival Allianz Cornhill.

RBSI chief executive Annette Court explained the deterioration in the company's combined ratio as the result of the introduction of broked business with the acquisition of Churchill, along with falling motor rates.

In contrast, R&SA achieved a 4.5 % percentage point improvement in its combined ratio (99.4% in 2003 to 94.9% in 2004).

Allianz Cornhill came in second with a 2.9 percentage point improvement (96.9% to 94%), followed by AXA

(2.4 percentage points better) and Norwich Union (2 percentage points better).

R&SA UK chief executive Duncan Boyle said the insurer's improvement demonstrated the company's "disciplined underwriting". He also said it was benefiting from the "streamlining of its back office".

R&SA was notably the only insurer to report a fall in premium income: net premiums written fell 11% to £2.5bn. In contrast AXA, NU and Allianz Cornhill reported increases in premiums of 4%, 6% and 1% respectively. RBSI reported a massive 192% growth in premium income, achieved partly through the acquisition of Churchill.

Looking at personal lines combined ratios, R&SA achieved the biggest improvement among its peers, improving by

5.3 percentage points to 98.4%. AXA came in second with a 3.8 percentage point improvement, followed by NU which improved by 1 percentage point.

Allianz Cornhill reported no change and RBSI did not publish a figure.

Despite AXA's improvement, its personal lines combined ratio is still above 100% at 105.4%, meaning the book is making an underwriting loss. NU only just breaks even with a combined ratio of 100%.

In contrast, AXA's commercial lines book has moved out of the danger zone to produce a combined ratio of 96.7% in 2004, compared to 105.4% in 2003 - an 8.7 percentage point improvement.

These efforts place AXA at the head of the pack in terms of improvements to commercial lines combined ratio. Allianz follows with a 5 percentage point improvement, then R&SA and NU.

All four insurers have a commercial lines combined ratio of under 100%. RBSI does not produce a breakdown for this sector.

Overall, all five insurers have produced good results. Profits have increased and, save for RBSI, combined ratios have improved. But this is to be expected as in 2004 rates remained firm for the most part and good results should flow from that.

The challenge for insurers in 2005, a year when the downward pressure on rates is growing, will be to continue to maintain the improvements in combined ratios, avoiding the temptation to chase premium volume at the potential expense of profit.

R&SA has shown this ability to stand firm in the face of falling premium income and has showed strong profit growth. A good example for others to follow. IT