R&SA Adds $100 M To WTC Reserves

NU Online News Service, Aug. 8, 10:00 a.m.EST?Royal & Sun Alliance Insurance Group plc, theparent of Royal & SunAlliance USA, reported a $100 millionaddition to its reserve provision for losses from the World TradeCenter disaster this morning, in conjunction with its six-monthearnings report.

The earnings announcement said that the reserve additionaccounted for nearly all of the difference between operatingearnings for first-half 2002 and first-half 2001.

The Group operating result was $458 million (301 million pounds)for the first half of 2002, compared to $556 million (366 millionpounds) for the first six months of 2001.

The increase in reserves for losses from the World Trade Centerdisaster (65 million pounds using the same exchange rate) resultedfrom adjustments in the size of business interruption lossesreported by insureds. About one-quarter of that amount isattributable to actual claim notifications and three-quarters toanticipated claim developments, the group said.

The group's initial estimate of World Trade Center claims justafter the disaster was 150 million pounds (roughly $228 million)?afigure which was increased 200 million pounds (roughly $300million) in mid-October of last year.

Commenting on results excluding the reserve addition, today'sannouncement said that the 2002 six-month result reflectscontinuing good performance across the Group's commercial anddirect personal lines of business.

Globally, the company's underwriting result (excluding WTC)improved by nearly 25 percent, helping to offset lower investmentreturns and a decline in the performance of the life insuranceoperations in the UK, the group reported in a statement releasedthis morning.

On a worldwide basis, the Group's half-year combined ratio for2002, excluding the World Trade Center provision, improved to 103.0from 104.3 for the first half of 2001. Including the World TradeCenter development, the combined ratio for the half-year was 104.7,0.4 points worse than last year.

Royal & SunAlliance USA's underlying six-month combinedratio (excluding WTC) also improved to 104.1 in 2002, compared to104.5 in 2001.

Worldwide property and casualty insurance premiums for the firsthalf of 2002 were $6,487 million (4,268 million pounds) vs. $6,790million (4,467 million pounds) for the same period in 2001.

This decrease stemmed entirely from a one-year quota sharereinsurance partnership with Munich Re. On an underlying basisexcluding the quota share arrangement, global property and casualtypremiums grew by 15 percent, the company said.

Royal & SunAlliance USA reported $1,524 million in netwritten premiums for the first six months of 2002. On an underlyingbasis excluding the quota share agreement, overall net writtenpremiums were basically flat at $1,693 million, compared to $1,705million for the first half of 2001.