Daily briefing: Friday - This time it's personal

RBS Insurance, the great beast of personal lines, is tweaking the engine again, this time with the appointment of Gus Park as commercial motor director Park is the latest in a series of appointments by chief executive Paul Geddes to get the business in shape for flotation next year.

Let’s not beat about the bush: RBSI had a horrendous 2010, in which its reserve strengthening approached an eye-watering £1bn – a massive sum, even given its position as the largest company in personal lines.

Bouncing back

It’s now on the mend and half-year results were impressive. Operating profit in the first half was £206m, a considerable improvement on the £253m loss made in the same period last year.

That’s clearly good news, suggesting that when the company is fully floated it could net the parent bank – and the taxpayer – between £3.5bn and £4.5bn, depending on the state of the capital markets.

But before that huge sum is reached, there are several questions investors should be asking:

• There’s every indication that RBSI is being extremely competitive on pricing again. Is this a ticking time bomb for the company’s combined operating ratio?
• Will chief executive Paul Geddes hang around after flotation?
• Having undergone a huge amount of reserve strengthening in 2010, how can investors be assured the company has adequate reserves ahead of flotation to ensure such damage is limited in the future?
• What place does a commercial-only broker such as NIG really have in a family of predominantly direct personal lines players?

More information

These are some of the big questions that will need to be answered. Furthermore, analysts who moan about the company’s lack of information for financial reports will probably want to see more detail for 2011 and prior accounts if RBSI intends to float in 2012.

Some pretty detailed loss development tables would go a long way towards assuaging their concerns.

If RBSI doesn’t get its act together soon, the investment community may arrive at a simple, although possibly erroneous, conclusion: if the bank doesn’t care about its subsidiary, why should they?

Fraud alert

Professional indemnity broker Clive Hesketh, 47, from Bury, fleeced his clients of at least £90,000. Hesketh faces jail when sentenced next month at Bolton Crown Court.

This is the second time this year Insurance Times has reported on a small insurance broker defrauding clients.

It really does seem that if a broker decides to break the law, it can take a long time before they’re caught. That’s because such low-level financial crimes are pretty much at the bottom of the authorities’ priority list.

And that begs the question: how many others are there out there who have gone rogue in the financial jungle?