Direct Line chief may net 10m pounds: Insurance arm trebles profits as Royal Bank reports half-year figure of pounds 92m

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The Independent Online
PETER WOOD, chief executive of Royal Bank of Scotland's Direct Line Insurance subsidiary, is set to land a bonus of at least pounds 10m for 1993 after his business trebled pre-tax profits to pounds 15m in the bank's first half.

Direct Line's contribution was an outstanding feature of Royal Bank's results announcement yesterday, in which it reported pre-tax profits of pounds 92m for the six months to 31 March, nearly double the figure a year ago.

Direct Line wrote nearly 290,000 motor insurance policies in the half- year, up 132 per cent, and its household insurance business also grew strongly. Mr Wood attributed the growth to cost competitiveness, personal recommendations and service.

Mr Wood is believed to be one of the highest paid people in Britain after his celebrated pounds 6m bonus in 1992. This was linked to the value of the insurance business, which he founded.

George Mathewson, chief executive, refused to speculate on Mr Wood's 1993 salary. But banking analysts estimated that, based on expectations of Direct Line's performance for 1993 and a bonus formula related to net growth of the company, his bonus could be at least pounds 10m.

Alison Deuchars, of Lehman Brothers International, said Direct Line's full-year profits could be pounds 40m to pounds 50m, and rise to pounds 100m in 1994.

Illustrating the mixed fortunes of economic recovery, Royal Bank's near-doubling of pre-tax profits was accompanied by a 15 per cent increase in provisions for UK bad debts. Overall provisions for bad debts were a historical high of pounds 183m, compared with pounds 163m in the same period a year ago, but the bank expects them to fall compared to last year.

Lord Younger, the former cabinet minister who is chairman of Royal Bank, said: 'This set of results is clearly encouraging . . . but there is still a long way to go.'

The bank raised its dividend by 7 per cent to 3p but the shares finished the day unchanged at 267p.

The ratio of costs to income improved and employee headcount fell by 6 per cent, or 1,270, on target for a 3,500 reduction by 1997. Net interest income rose 10 per cent and other operating income, which came from commissions, fees and foreign exchange, rose by 30 per cent to pounds 313m. Expenses rose by 10 per cent.

Profits in branch banking fell to pounds 6m from pounds 8.4m. Corporate and institutional banking increased profits by nearly 40 per cent to pounds 57m.

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