RBS 2012 Annual Report Download - page 31

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RBS GROUP 2012
Making RBS safer
We took several actions to make RBS safer
and to make Direct Line Group more robust
for its future.
We successfully completed the sale of 35%
of ordinary shares in Direct Line Group on
the London Stock Exchange. Demand for our
shares was strong.
Direct Line Group's IPO raised £911 million
for RBS Group.
Our risk-based capital coverage ratio was
151.4% at the end of the year, compared
with our target of 125-150%.
Our Insurance Groups Directive (IGD)
surplus was £1.8 billion and our IGD
coverage ratio was 279.4%.
Direct Line Group manages its capital levels
with the objective of maintaining a credit rating
in the "A" range.
Building a better bank that serves
customers well
Direct Line Group made dividend payments of
£1 billion to RBS Group in 2012. We enhanced
efficiency and improved pricing and underwriting.
We made progress on our aim of cutting costs
by £100 million per year by 2014. We will
achieve that through a range of actions and
we have already announced half of those
initiatives. These savings come on top of
cutting the number of UK sites from 32 to 16.
We achieved that by mid-2012.
We continued to roll out our claims
transformation programme. It is a more efficient
way of managing claims. Our new system for
managing claims is handling 400,000 motor
and own brand home claims.
One of our assets is the large amount of data
we hold. We are using it to price products more
accurately by understanding better still the
risks we are taking.
We made significant progress in developing
our distribution capabilities. The partnership
agreements that we renewed or expanded
represent a substantial portion of our portfolio,
especially in the home segment.
We expanded our agreement with
Sainsbury’s Bank. Now we provide its
customers with home insurance as well
as motor insurance.
We agreed a distribution agreement with
the UK Retail division that will last five years.
That means we will continue to provide
general insurance products when we
are divested.
We launched Churchill and Privilege on
comparethemarket.com. That means their
motor and home insurance products are
available on the UK’s four major price
comparison websites. This reinforces our
strategy of delivering products through
a range of channels.
Changing our culture
We started The Best Programme in 2011,
continuing it last year. It is our cultural
transformation programme. The Best
Programme focuses our people on how to
achieve our ambition – to be Best for Customer,
Best for Shareholder and Best for our People.
All of our employees were invited to take part
in facilitated workshops as part of The Best
Programme. These workshops engage our
people and gather their ideas about how we
can become ‘Best’. Our state of the art internal
social media site – Best Quest – allows open
discussion and lets people post their ideas for
the changes we need to make if we are to
achieve our goals.
One of the most important outputs of the
programme was the creation of a set of values,
conceived and written by a team representing
all our people – from the bottom up.
Direct Line
Group
Paul Geddes
Chief Executive,
Direct Line Group
Operating profit of £441 million was
£13 million, three per cent, lower than in
2011 as improved underwriting results
were more than offset by a £22 million
reduction in investment income. Total
income of £3,474 million was £333 million,
nine per cent, lower. Net claims of £2,427
million were £345 million, 12 per cent,
lower. Expenses of £849 million were
broadly flat. Return on tangible equity was
higher than in 2011 at 11.7 per cent. The
combined operating ratio improved by
100 basis points to 100 per cent.
Performance highlights 2012 2011
Net premium income (£m) 3,718 3,969
Net claims (£m) (2,427) (2,772)
Operating profit (£m) 441 454
Combined operating ratio (%) 100 101
Return on tangible equity (%) 11.7 10.3