RSA back to profit in car cover but weather cost £40m

The company grew UK premiums by one per cent to just under £1.5bn in the six months to June 30, but with a £62m increase in weather-related losses over the period it only broke even at an underwriting level.

The East Midlands, North East and North West were the worst-affected areas, suffering storm damage, flooding and even hail stones the size of golf balls as June produced £40m of weather losses in household, property and motor.

Despite the conditions, the personal motor insurance business returned to underwriting profit for the first time in four years.

In the face of a “dysfunctional” motor insurance market, RSA has focused on more profitable areas in the UK, such as pet and household insurance, where premium income was up by 13 per cent and seven per cent respectively in the half year.

The group’s combined operating ratio, which shows claims and expenses as a percentage of premium income – where a figure below 100 per cent means a profit is being made – was put at 99.9 per cent due to the level of claims losses.

With two earthquakes in northern Italy also impacting the business, underwriting losses from the UK and Western Europe division came in at £31m, compared with a profit of £5m a year earlier.

RSA, which employs 23,000 staff, also has major operations in countries such as Canada, Ireland and Scandinavia, as well as Asia and Latin America.

Across the group, it increased net written premiums by two per cent to £4.3bn while the overall operating ratio was 95.2 per cent, compared with 93.2 per cent in 2011.

However, the insurer’s pre-tax profits were down 38 per cent to £233m.

Chief executive Simon Lee said: “Economic conditions will undoubtedly remain tough in some of our markets.

“Despite this, we remain confident of delivering a good performance for the full years and, assuming more normal levels of weather losses for the remainder of 2012, now expect to deliver a combined operating ratio for the group of better than 96 per cent.”

The group announced it was increasing the interim dividend by two per cent to 3.41p.

Eamonn Flanagan, at Shore Capital, said: “RSA reported a good set of 2012 interim results which exceeded both ours and the market’s expectations.

“Crucially, to us, the dividend increase was marginally better than we had expected.”