Losses on insuring building societies against repossessions totalled pounds 160m, down from pounds 257m in 1991. The group suffered further pain from the property sector in its estate agency business, where losses rose by pounds 14m to pounds 33m as house sales fell 11 per cent.
Royal stuck to last year's forecast that indemnity losses would be further reduced to pounds 90m this year and refused to bow to gloomy forecasts in the City. Some analysts claim that repossessions will rise again as building societies take advantage of a recovery in prices to dump their problem cases on to the market. Roy Randall, a Royal director, said the company believed the societies when they said this would not happen.
UK general insurance operations also showed an improvement, losing pounds 50m after a deficit of pounds 367m in 1991. Richard Gamble, chief executive, said that if mortgage indemnity losses were excluded the UK business showed a pounds 220m improvement over the year to a profit of pounds 110m. On the same basis, the group as a whole would have made a profit of pounds 41m.
He reaffirmed Royal's determination to look for profitability before worrying about market share, and said the slashed annual dividend of 5p against 11.25p in 1991 was a 'base on which we can build.'
Premium income was little changed from the year before at pounds 3.42bn, down pounds 41m. Adjusting for the pounds 130m sale of control of the Royal Netherlands business, there was a small rise.
Royal said it felt under no pressure to make the rumoured rights issue. A pounds 100m 10-year bond issue launched with the results is purely to replace existing shorter-term loans and does not count towards the group's solvency margin, which improved from 40 to 42 per cent.
'We must get this company back into profit before we start having any major ideas of expansion,' Mr Gamble said, adding that the UK business made a profit in the second half of last year.
Potential claims for employers' liability on problems such as deafness, repetitive strain injury and even passive smoking have led Royal to set aside an additional reserve of pounds 20m at home.
The group is not expecting large increases in insurance premiums in the domestic UK market, although there would be selective increases for riskier customers, particularly in motor insurance.
Reinsurance, where Royal is cutting back, lost pounds 79m compared with pounds 38m in 1991. Life assurance halved profits to pounds 27m but US general insurance made pounds 24m against pounds 3m last time after pounds 40m of weather-catastrophe losses.Reuse content