Shares in Royal & Sun Alliance lost some of their recent fizz yesterday, despite reporting half-time operating result 79 per cent higher at £329 million with a reassuring performance across the board.
After running ahead to a new 12-month high of 95p, the shares settled back to finish 2p lower on the day at 92p. The interim dividend is raised by a cautious 2.4 per cent to 1.69p.
Britain's second-largest commercial insurer said its results were buoyed up by higher sales, good Scandinavian results and a strong performance in its UK commercial and personal insurance business.
Chief executive Andy Haste said all R&SA's core businesses were achieving strong returns in a very competitive market.
"It is tougher to win new business out there and we are very selective in what we will write," he said.
Royal & Sun shares have been the fourth-best performer among UK general insurance stocks over the past three months, rising 24 per cent as the disposal of the US motor operation for $200 million (£112 million) last month raised hopes that R&SA may get out of the US altogether.
Instead Mr Haste said the proceeds from this sale would remain in the US to provide extra capital support to an activity that "remains exposed to a number of risks and uncertainties". But he is still in talks with the US regulator about the possibility of a total pull-out.
In the UK, R&SA is strengthening its balance sheet by tackling its pension fund deficit.
Last month UK employees voted to exchange their final salary schemes to new ones based on their average career earnings. This will cut the deficit by £126 million after tax, Mr Haste said. Underwriting results from its ongoing operations continued to improve. In the UK claims absorbed 92.5 per cent of the money received in premiums, down from 95.3 per cent a year ago.
Across the group this ratio - again for on-going operations - improved to 92 per cent from
93.2 per cent.
Net written premiums rose to £2.9 billion during the six months from £2.5 billion at the same stage last year. Mr Haste said talks with US regulators are likely to take a year or so, but R&SA's priority was on completing the sale of its US motor unit.
The US has been R&SA's Achilles' heel for a number of years because of its large and uncertain claims exposure there to asbestos-related risks and worker compensation policies.
Once a group with global ambitions, RSA's core operations now are in Scandinavia, where it has a 71.5 per cent stake in Denmark's Codan, and the UK.
Yesterday it also announced a bancassurance agreement that will start with a pilot scheme in the fourth quarter of this year with Swedbank, Sweden's fourth-biggest bank.
Mr Haste said this deal, the single largest bancassurance agreement in Sweden, would boost R&SA's exposure to a growing market.