Royal SunAlliance profits slip

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The Independent Online
Royal SunAlliance yesterday blamed what it called "the London bus syndrome" for a leap in claims in the third quarter of this year which caused its profits to slip.

The composite insurer said it had been hit by an unusually high number of claims, which cost pounds 93m, 79 per cent more than in the third quarter of 1996. This helped to push down profits over the nine months by pounds 3m to pounds 738m.

A company spokesman said: "We normally expect there to be a steady flow of reasonably large claims, such as fires and floods. But this year we have had an extraordinarily good first six months. Like the London buses all coming at once, we had all the claims between July and September."

Royal SunAlliance said the volcano eruption in Montserrat and large claims on UK property had boosted the claims figure. The company said it had also been hit by the strong pound because half of its general insurance and a third of its life insurance was sold abroad.

Investors drove down Royal SunAlliance shares by 19.5p to 580.5p. The drop of 2.5 per cent compared with a 1 per cent slide in the FTSE 100 index.

Some analysts said they were disappointed the insurer had as yet failed to deliver on a promised share buy-back. It said Budget changes to advanced corporation tax had to be digested first.

One analyst said: "The market is dissatisfied with the attitude and is unsure whether the company may be procrastinating. The proposal was made before the Budget but if the commitment remains to go ahead with the buy-back, the company should go on."

Other observers said performance in the US had been lacklustre. While last year's merger between Royal Insurance and Sun Alliance had produced savings of pounds 110m in line with expectations, the company needed a new focus, they added.