RBS 2009 Annual Report Download - page 103

101RBS Group Annual Report and Accounts 2009
Business review
2009 compared with 2008
Operating profit was severely affected by the rising costs of bodily
injury claims, declining to £58 million. Significant price increases were
implemented in the latter part of the year to mitigate the industry trend
of rising claims costs.
Income grew by 1%, with premium income stable but lower reinsurance
costs. Investment income was 16% lower, reflecting the impact of low
interest rates and returns on the investment portfolio partially offset by
gains realised on the sale of equity investments.
In-force policies grew by 3%, driven by the success of own brands, up
11%. Churchill and Privilege have benefited from deployment on
selected price comparison websites, with motor policy numbers up 19%
and 3% respectively, and home policies up 32% and 109% respectively,
compared with prior year. Direct Line motor and home policies grew by
4% and 2% respectively. The partnerships and broker segment declined
by 10% in line with business strategy.
Expenses fell by 2% in 2009, with wage inflation, higher industry levies
and professional fees offset by cost efficiencies, reduction in headcount
and lower marketing expenditure.
Net claims were 20% higher than in 2008 driven by a £448 million
increase in bodily injury claims as well as by adverse weather
experienced in the fourth quarter. Significant price increases were
implemented in the latter part of the year to mitigate the industry trend
of rising claims costs, and additional significant initiatives have also
been undertaken to adapt pricing models and enhance claims
management.
The UK combined operating ratio, including business services costs,
was 105.9% compared with 93.6% in the previous year, with the impact
of the increase in reserves for bodily injury claims and the bad weather
experience only partially mitigated by commission and expense ratio
improvement.