RBS Insurance records large motor losses in interim results
RBS announced a couple of weeks ago that their insurance operation RBSI which writes over £1bn of net premium income from 17m policies has declared a technical underwriting loss of £378m in its interim results to June 2010 prior to investment income.
The combined ratio measures the costs of claims (payout and legal and admin costs) compared with the premiums. It must be less than 100% to make a profit. RBSI has recorded a combined ratio of 120.2% which is a 25 percentage points worse figure year on year.
11.9 points of this ratio derived from increased bodily injury claims relating to prior years.
Paul Geddes, CEO, RBS Insurance said: "Our results continue to be heavily impacted by the need to increase our reserves for bodily injury claims, largely driven by an increase in the cost of claims from prior years. This has meant that our reserves had to be strengthened by a further £320m resulting in a loss for the period. Excluding these historic motor claims, our underlying business performance remains profitable, reflecting decisive action to address the issue and progress on our strategy.
"To address the emerging personal injury issues, we have taken planned action on pricing and underwriting in motor, which has resulted in a decline in policies as we exit less profitable segments of business. We have undertaken an extensive review of our data in this area and trends on these claims will continue to be monitored closely. We are encouraged by the work we've been doing with the ABI, which has been successful in securing government support for the Jackson review, which will be a key factor in reducing bureaucracy and litigation costs in personal injury cases."
