Bank quiet on insurance division sale as H1 losses total £691m .
Royal Bank of Scotland Insurance has posted a £403m opertaing profit for the first half of 2008, up from £258m at this stage last year.
Total income was slightly lower at £2,786m, down from £2,843m. In a statement, the bank said the result reflected "a strategy of discontinuing less profitable partnership contracts while focusing on growth in our own-brand businesses."
The business also reported a strong recovery in contribution, with an increase of 41% to £513m. It said excluding the £125m impact of the June 2007 floods, contribution grew by 5%.
Fred Goodwin, chief executive of RBS, said in his review: "RBS Insurance has also performed well, with contribution recovering strongly as claims fell from the high flood-affected levels recorded in 2007."
In its statement, RBS added: "In the UK motor market we have increased premium rates to offset claims inflation and continued to target lower risk drivers, with price increases concentrated in higher risk categories in order to improve profitability.
"During the first half we deployed selected brands on a limited number of aggregator web sites. Our international businesses in Spain, Italy and Germany performed well, with income up 25% and contribution growth doubling.
"All three countries achieved strong increases in contribution. Over the last six months own-brand motor policy numbers have again begun to increase to 6.8m".
The bank said own-brand home insurance policies inforce increased by 23% since December, and overall inforce policies grew by 46% to £5.5m (2007 3.8m).
RBS Insurance as a whole saw insurance premium income, net of fees and commissions, decrease 3% to £2.4bn, reflecting 4% growth in its own brands offset by an 11% decline in the partnerships and broker segment.
Direct expenses grew by 17% to £410m, as a result of accelerated marketing investment in its own brands, including the launch of our new commercial insurance offering, Direct Line for Business.
Net claims fell by 13% to £1.9bn, benefiting from more benign weather conditions. Excluding the impact of the 2007 floods, net claims costs reduced by 6%.
The UK combined operating ratio for 2008, including manufacturing costs but excluding floods, improved from 95.8% to 94.6%.
Goodwin made little comment on the sale of the banks insurance division. When talking about disposals, he said: "From our review of market conditions, we concluded in April that we needed to materially strengthen our capital base, and that to accomplish this we needed to conduct the rights issue which was completed in June.
"Our capital plan set a target for our capital ratios to exceed 5.0% for core Tier 1 and 7.5% for Tier 1 by mid-year, on a proportional consolidated basis. In fact, our Core Tier 1 ratio at 30 June stood at 5.7% and we are on course to achieve our target level, in excess of 6%, by the end of the year. Our Tier 1 ratio at 30 June was 8.6%, already in excess of our target minimum.
"Our disposal plans are on track, and we have already announced agreements that contribute £1bn to capital, including the already-completed sales of Angel Trains and European Consumer Finance and the recently announced agreement to sell our stake in Tesco Personal Finance to our joint venture partner."
The bank reported an overal pre-tax loss of £691m after credit market write-downs of £5.9bn.
