The epic third quarter Interim Management Statement from the new, transparent RBS is proving to be something of a treasure trove.
Here’s the bank explaining the dismal performance of its to-be-divested insurance business, where profits fell 92 per cent during the quarter (emphasis FT Alphaville’s):
Net claims were significantly higher than expected in the quarter, with an increase of 22% compared with 2Q09. This was largely due to greater claims being made against our drivers for bodily injury accidents, resulting in the need to strengthen both current and prior years’ claims reserves by a total of £118 million above that projected for the quarter. Significant action has now been taken to mitigate this impact including motor price increases and refining our claims handling processes.
What?
Has Direct Line become the insurer of choice for the nation’s Citroen Saxo driving boy racers?
Apparently not. It seems Direct Line has been too aggressive in its pricing, given the growing American-style claims culture in the UK.
And the bad news is that shareholders (that is, the UK taxpayer) can expect more provisioning when RBS reports its fourth quarter figures.
Related link:
Hester: “We messed up on RBS Insurance” – FT Adviser