Royal bounces into black: Steady improvement sees pounds 19m profit from UK underwriting

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The Independent Online
ROYAL Insurance made a pounds 19m profit from its insurance underwriting business in the UK in its latest three months, the first time it has been into the black in a quarter for four years.

The swing into UK underwriting profit came after a steady improvement this year, especially in personal insurance business, where premiums are higher and risk assessment has been improved.

It pulled the group round to a pounds 61m profit before tax and disposals in the third quarter, compared with a pounds 4m loss a year ago.

In the first nine months of the year, Royal made pounds 113m before tax and disposals, pounds 196m more than the same period in 1992.

There was also reassuring news for customers. Roy Elms, underwriting director, said he expected insurance premiums in personal markets to stabilise in the short term after a succession of increases going back to 1991. There were still some price increases to come in commercial business, where the hardening of rates had started later, he added.

Richard Gamble, chief executive, said: 'There is not a price war developing today, just a competitive marketplace.' No across-the-board increases in rates were planned.

No big catastrophes emerge from the results, with the floods in the US Midwest costing Royal only pounds 7m this year. But US weather losses nevertheless rose pounds 17m to pounds 53m in the first nine months compared with a year ago, leaving the US operations pounds 7m in the red ( pounds 12m profit).

Royal has emerged almost unscathed from the California fires. Roy Randall, a director, said the company had 230 household policies in California, 27 in the areas where the fires started, producing one claim for minor smoke damage.

Mr Randall also played down stock market fears of a big overhang of pollution claims in the US, saying independent studies had shown Royal's ratio of pollution risk reserves to total reserves was half as high again as the US industry average; its reserves also covered six years of payouts at current rates, compared with an industry average of three to four years.

In the UK, the company's direct insurance offshoot, The Insurance Service, saw a 40 per cent increase in premium volume.

Royal is reducing its exposure to reinsurance but results are still deteriorating because of continued late reporting of claims from previous years. The loss so far this year is pounds 60m compared with pounds 41m last year.

Mr Gamble said part of the group's improvement was due to the upturn in the market as a whole in the UK, but it had also been concentrating on core skills and improving efficiency.

The shares rose 2p to 316p.

(Photograph omitted)