Daily briefing: Friday – Sweet music for RBSI

Paul Geddes is a musical man. But while the RBSI chief executive’s instrument of choice is a violin, today he has something to sing about, following the publication by the bank of its third-quarter results.

Last year Geddes was consistently upbeat in the face of a string of poor results. This began to sound like a stuck record, but today’s results show that Geddes had some cause to be optimistic.

RBSI’s profits were £123m in the third quarter of the year, compared to £206m for the first half. To put these figures into context, RBSI is £329m in the black so far this year, compared to a loss of £286m for the equivalent period in 2010.

Even more cheers will be heard thanks to news that RBSI’s combined ratio has stayed below 100 for the second quarter in a row. After haemorrhaging cash for two years from bodily injury claims, this will be a source of huge relief. 

RBSI’s huge exposure to the motor market means that it has benefited disproportionately from the return to rating sanity that we have seen over the past year.

RBSI is understandably anxious to stress that the battle isn’t over and the spectre of bodily injury claims hasn’t gone away. But with RBSI continuing to gear up for its long-planned flotation, for today at least RBSI is a good news story. 

Playing with the big boys

Covea has put back the launch of its planned price comparison site after insurers and consumers said they didn’t want another aggregator like the current big four: Comparethemarket, Confused, Gocompare and Moneysupermarket.

But Covea has now said it wants its proposition to have some “real differentiation” before it launches. It will be interesting to see what this turns out to be. 

Covea showed its ambition for the aggregator by stumping up £20m for marketing and adverts to accompany the launch – similar to the amounts spent by the established big players.

Part of the reason aggregators spend such massive amounts on adverts is precisely because consumers find it hard to tell them apart. Price comparison sites rely on publicity campaigns to promote their brand and keep premium coming in amid the ruthless churn of online personal lines business.

It’s clear the existing price comparison sites are already hungry for differentiation. One way they’ve been doing this is by hiring teams of financial journalists to write for them, with the aim of promoting their brand by getting flighty consumers to associate them with quality advice and news rather than just increasingly commoditised insurance sales.

So for Covea to come in with “real differentiation” in the face of all this will be quite something. It will take some lateral thinking to crack the problem.

Elephant in the room

By David Blackman, deputy editor

There was a strong whiff of unreality about a conference held yesterday by the FSA to update insurers on preparations for Solvency II.

In the foyer of the Queen Elizabeth II Conference Centre in Westminster, where the FSA held its gathering, the video monitors were showing a live feed of Greek prime minister George Papandreou’s announcement to parliament about his referendum U-turn. But inside the hall, the debate about Solvency II was taking place as if this week’s seismic events in the eurozone hadn’t even happened.

Nevertheless for insurers, FSA insurance director Julian Adams had some welcome words. Last month, the regulator announced that companies had to be ready to comply with Solvency II by 2013, even though the directive will not be legally binding until the following year. 

That raised the prospect of having to fulfill three different sets of regulatory requirements – both the Solvency I and II directives as well as the UK’s own independent capital assessment (ICAS) requirements – all of which adds up to a huge waste of time and money. Insurers called for Solvency II to be used as a proxy for their ICAS requirements, given that in many respects one mirrors the other. Adams signalled in his speech yesterday that the FSA was willing to explore this route with insurers.

It’s a welcome step on the part of the regulator. But, while the economic and political fate of the eurozone continues to be so uncertain, questions will continue to hang over whether that the long awaited directive will ever see the light of day.