RBS 2010 Annual Report Download - page 38

RBS Group 201036
RBS Insurance
2010 was a disappointing year financially. A 2%
fall in income and increased claims, offset partly
by a 7% reduction in expenses led to a loss of
£295 million. However, the actions we took to deal
with the challenging environment contributed to
a clear improvement in our underlying financial
performance in the final quarter.
In addition, the fundamental strengths of our
business enabled us to build on market leading
positions, while setting out plans to transform
and enhance how we do business in the future.
Working hard for customers
2010 saw some of the worst weather conditions in the UK for over
20 years. Drivers got stuck in the snow, cars failed to start and the
treacherous conditions led to traffic collisions. Our accident repair
centres concentrated on getting customers back on the road, repairing
nearly 60,000 vehicles in January and February alone. Green Flag was
called out over 220,000 times in January and February, battling through
difficult conditions to reach and help stranded customers.
It was a challenging year for air travellers, too. The volcanic ash cloud
brought air travel to a temporary standstill in Europe, while several
holiday companies and airlines went out of business. Our travel
insurance brands assisted over 12,000 customers by taking a flexible
approach to their policies’ terms and conditions.
The increase in bodily injury claims continued to affect our financial
results. We took steps to meet genuine claims more efficiently and
ensure that suspect cases can be highlighted at an earlier stage. We
also implemented changes to mitigate any future impact of bodily injury
claims. This included NIG exiting its personal lines broker business to
focus on its expanding commercial business.
Restoring profitability
We remained the largest personal lines insurer in the UK, built around
strong brands such as Direct Line, Churchill and Privilege. We are now
the UK’s largest home insurer, adding to the position that we already
held as the UK’s largest motor insurer. We continue to provide support
and reassurance to millions of UK motorists through our Green Flag
breakdown recovery service.
Paul Geddes
Chief Executive,
RBS Insurance
MFor biographies
see pages 226-229
RBS Insurance sells and underwrites retail
and SME insurance over the telephone and
internet, as well as through brokers and
partnerships. Its brands include Direct Line,
Churchill and Privilege, which sell general
insurance products direct to the customer,
as well as Green Flag and NIG. Through its
international division, RBS Insurance sells
general insurance, mainly motor, in Germany
and Italy.
Key business highlights
• Performance was adversely affected by significant weather
events in Q1 and Q4 and the impact of bodily injury claims
• Net claims were 9% higher than in 2009
• International own brands in-force policies grew by 15%
• Expenses were reduced by 7%
2010 2009
Performance highlights £m £m
Insurance net premium income 4,311 4,354
Total income 4,092 4,155
Expenses (703) (759)
Net claims (3,961) (3,635)
Impairment losses —(8)
Investment income 277 305
Operating (loss)/profit (295) 58
Return on equity (7.9%) 1.7%
Expense ratio 13% 14%
Combined operating ratio 115% 106%
Return on equity (%) Cost:income ratio less claims (%)
2010 (8) 172
2013 >20 <60
target
250,000
Direct Line for Business
Customer policies
220,000
times that Green Flag was
called to reach and help
stranded customers in
January and February 2010