Decline in own-brand motor policies and increased pricing
RBS Insurance made a loss of £50m in the first quarter of 2010 compared with an £81m profit in the same period last year.
RBS said it saw a small decline in own-brand motor policy numbers during the first quarter, following increased pricing introduced during the period, offset by good growth in the international and commercial business.
Compared with the first quarter of 2009, Churchill’s motor policy numbers grew by 11% and its home policies by 27%, while Direct Line, which is not available on price comparison websites, held motor policy numbers stable and grew home policies by 2%.
Financial highlights £m (2009 in brackets)
- Earned premiums 1,130 (1,106)
- Reinsurers' share 34 (45)
- Insurance net premium income 1,096 (1,061)
- Net fees and commissions 89 (92)
- Other income 92 (108)
- Total income 1,099 (1,077)
- Gross claims 982 (798)
- Reinsurers' share 8 (5)
- Net claims 974 (793)
- Operating (loss)/profit before impairment losses -50 (81)
- Operating (loss)/profit -50 (76)
The combined operating ratio, including business services costs, was 113.3% compared with 101.5% in Q1 2009. RBS blamed the impact of increased reserving for adverse weather conditions and bodily injury claims, which was only partially mitigated by expense ratio improvement.
Paul Geddes, chief executive of RBS Insurance said: “In line with our business priorities, we have continued to manage our business to ensure we’re providing good value for our customers, while writing profitable policies. This has resulted in customer policy growth of 3%, which has been driven by our own brands that have increased by 8%. This has been partially offset with a decline in partnership and broker business, in line with expectations.
"To minimise the impact of rising bodily injury claims, we have progressed with improvements to our claims handling and fraud detection processes, as well as increases to our motor policy pricing. I’m pleased to say that due to the strength of our brands, even with rate increases, the number of motor policies is broadly stable. Direct Line home policies are up by 2% and Churchill home and motor policies grew by 27% and 11% respectively.
“Today’s results give reassurance that our initial actions are beginning to work and we are heading in the right direction, but we have a significant distance still to travel. There is much more to do to return this business to historic levels of performance, whilst still providing excellent value and customer service, so this is our main priority. We are improving our pricing and claims handling capability, together with our capital and efficiency position, and implementation is well underway.”
