Fair weather helps earnings at Royal & Sun climb 22%

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The Independent Online

Royal & SunAlliance, the UK's largest general insurer, unveiled another strong increase in first-half profits yesterday, boosted by recent benign weather conditions at home and abroad, prompting it to raise its performance forecasts for the rest of the year.

The group saw its post-tax profits increase by more than 22 per cent during the first six months of the year, on the back of only a 2 per cent rise in net written premiums. The group's overall combined ratio (COR) - a key measure of insurers' profitability - improved from 92.8 to 91.7 per cent compared with the same period last year. Anything under 100 per cent represents a profit.

Andy Haste, the chief executive, said that having originally targeted a COR of 95 per cent for the year, he now expected the group to deliver a better result than this.

He said about £52m of the group's £171m operating result was accounted for by benign weather conditions, adding that he still believed the group could achieve its performance targets for the year even with a tougher second half.

The group's COR improved from 96 to 89.5 per cent in its UK personal lines business, which runs under the More Than brand. The COR in RSA's UK commercial lines business worsened from 90.8 to 92.4 per cent.

Outside the UK, RSA improved its performance in all of its core markets. In Scandinavia, where the group owns a 72 per cent stake in the Danish insurer Codan, the COR improved from 91.3 to 90.8 per cent, while its international business moved from 94.8 to 93.4 per cent.

The group still has problematic legacy issues in the US, where it is embroiled in egal actions. Mr Haste said the situation was stable, adding that RSA had managed to consolidate all its US businesses under a single regulator, as opposed to the 11 it was forced to deal with before. He hoped this may help RSA to sell on its US liabilities.

"These are good numbers, but there is a question mark over whether they can deliver the combined ratios and the implied profitability they've promised," said Kevin Ryan, an analyst at ING. "It's all about how they manage the downturn."

Shares in RSA fell 1.3 per cent to 131.75p yesterday, giving the company a market value of £3.9bn.

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