RSA doubles profit despite flood bill

THE recovery at Royal & SunAlliance is gathering momentum, with the insurance group today reporting a near doubling in first-quarter profits. This is despite a £20m floods bill resulting from gales that buffeted the north of England earlier this year.

Chief executive Andy Haste, who has slashed costs and sold underperforming business since taking over two years ago, said the group had made a strong start to 2005.

Operating profits in the three months to 31 March surged 95% to £160m, with net written premiums rising 24% to almost £1.5bn. RSA's combined operating ratio, a measure of how much it makes on the premium paid by customers, improved to 91.2% from 94.2%.

Haste said: 'Our net written premiums, operating result and profit after tax have all increased significantly over the last year and we've delivered good performances from each of our core businesses.'

In the UK, where RSA runs the More Than brand, the group was able to absorb £24m of weather losses caused by January's floods in the North-East and Cumbria.

Haste's success in stabilising RSA has won over the City, but analysts still see no easy solution to RSA's problems in the US, where it has suffered spiralling asbestos-related claims from policies dating from the 1960s. RSA said open claims were down 11% in the US in the first quarter.

RSA stopped writing most new business in the US under chief executive Andy Haste in 2003, but he has set aside hefty reserves to meet possible future claims from policyholders there. It has been the group's Achilles heel for a number of years, due to possible compensation claims for asbestosis from the workers of some manufacturing companies it insured.

The company has attempted to reposition itself as a pure provider of general insurance in recent years. Falling stock markets between 2000 and 2002 hit the life insurance arm hard.