Royal & Sun Alliance disappointed investors today after posting results at the lower end of market forecasts.

Shares in the general insurer slipped 9% as an increase in the amount of money set aside to pay out on claims caused operating profits to fall to £140 million from £226 million a year earlier.

At the bottom-line, R&SA improved losses to £146 million, from a deficit of £953 million in 2002, after a year of radical change at the group.

R&SA said the year had been one of "strong improvement" as all its businesses outside of the United States managed "substantially better" performances.

Among developments during the year, R&SA raised £960 million through a rights issue and took steps to focus on its UK, Scandinavian and Canadian operations. Cost-cutting resulted in about 1,000 UK job losses in September.

Releasing figures for 2003 today, R&SA said its most important market of the UK had exceeded its targets for performance improvements.

The division, which includes the More Than business, achieved underwriting profits of £21 million, a £169 million improvement on 2002.

The result in its commercial arm continued to be "extremely good", with the underwriting result for the year £76 million better than 2002 after strong showings in the property and motor sectors.

Personal lines performance was also significantly better, with a £93 million improvement, although R&SA said subsidence claims following the hot summer remained an issue. The final cost is unlikely to be known for some time.

Most of R&SA's difficulties have stemmed from the United States with the company recording an underwriting loss of £651 million - most of which related to provisions booked to cover workers' compensation and general liability lines. In September R&SA announced plans to stabilise the US operation, including through the sale of some businesses.

R&SA warned today it expected 2004 to be a "very challenging year" for the US business as it faces up costs associated with exiting certain operations.

However, it added: "We do anticipate that circumstances will improve from 2005 as expenses reduce to a level more in line with the new premium base."

Thursday March 11, 2004