RSA home premiums to rise despite soaring margins

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Royal & SunAlliance said yesterday that hard-pressed British consumers were facing inflation-busting premium rises of 6 per cent in household insurance.

Despite this the insurer said that during the first nine months it made a staggering £21.60 out of every £100 of UK householder insurance premium taken in after costs and claims have been taken out.

The huge profit margin is largely due to relatively benign weather conditions and an absence of storms keeping claims low. Last year the company made £7.30 on every £100 of premium during the same period.

Motor rates are also rising at around 4 per cent, although the insurer actually loses £2.80 for every £100 of premium.

Overall the group reported pre-tax profits of £477m against £583m the previous year. However, the previous year's figure was boosted by one-off gains from the sale of RSA's Japanese business and the restructuring of the pension scheme.

Not including exceptionals, RSA made £473m against £341m last year, slightly less than analysts' consensus forecast. While personal insurance continues to rise in price, businesses had it better with commercial rates continuing to fall in almost all categories and in all RSA's core markets of Britain, Canada and Scandinavia.

Andy Haste, the chief executive, said, however, that the company was seeking to avoid unprofitable business and had turned away £230m of premiums as a result. "We are working hard to seek out profitable areas and niches," he said.

Overall the group's combined ratio was 93.1 per cent, meaning it makes £6.90 on every £100 of premium taken in before investment returns.

Mr Haste said he was keen to expand the business in the Baltic states, central and eastern Europe and Latin America.

There has been speculation that RSA might be interested in the AA breakdown company, whose major rival the RAC is owned by Norwich Union.

Mr Haste said he thought the AA was "a good business" but indicated that RSA remained keen on "bolt-on" acquisitions rather than "transformational" deals.

RSA's shares have been rising recently amid speculation that the company could be a bid target now it has returned to relative health.

Mr Haste declined to comment on the rumours. The shares slipped 3p to end at 150.5p.