'No complacency' at buoyant Royal: Profits surge to pounds 32m despite losses in US

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ROYAL INSURANCE made first- quarter pre-tax profits of pounds 32m, against pounds 2m last year, reinforcing the picture presented by rivals of the continuing strong recovery in Britain. But there were heavy losses from the severe winter in North America.

Royal's general insurance business in the UK made a profit on underwriting of pounds 10m, after a loss last year of pounds 41m. With pounds 13m from life insurance, the UK arm increased its profit from pounds 6m to pounds 61m.

With many analysts fearing the prospect of falling premium rates, Richard Gamble, chief executive, said: 'The return to profit has been hard-won and in no way gives rise to complacency.'

Losses on domestic mortgage indemnity insurance, which caused Royal enormous problems during the recession, fell to pounds 17m, from pounds 26m in the first quarter last year. The company lost another pounds 5m on its estate agencies.

Mr Gamble said the severe weather in North America and the Los Angeles earthquake had cost Royal pounds 55m. The underwriting loss in the US rose from pounds 94m to pounds 131m. The worldwide underwriting loss declined from pounds 129m to pounds 96m.

Mr Gamble said Royal had made an encouraging start despite the losses in North America. In the UK, premium rates on personal lines had stabilised, but commercial insurances were still increasing.

He added that the UK life insurance arm had been given a clean bill of health from Lautro, the regulator.

Total premium income fell from pounds 1.2bn to pounds 1.1bn due to an 8 per cent fall in life insurance premiums. Income from UK general insurance of pounds 422m represented an underlying increase of 6 per cent, though Royal saw a modest fall on its personal lines business.

Mr Gamble said most of the fall was deliberate, representing business it did not wish to write. Mortgage indemnity premiums also fell.