Royal & Sun's profit freefalls

Costs associated with GST and the purchase of Tyndall Australia has punished Royal & Sun Alliance Australia, dramatically reducing its net profit of $47 million in 1998 to $2 million in 1999.

Costs associated with GST and the purchase of Tyndall Australia has punished Royal & Sun Alliance Australia, dramatically reducing its net profit of $47 million in 1998 to $2 million in 1999.

The company’s operating profit in 1999 was $73 million, compared to $71 million in 1998.

The general insurance business produced an operating profit of $59 million com-pared with $66 million in 1998. Gross insurance premiums experienced a 10 per cent increase to $1.5 billion in 1999.

Direct insurers AAMI and Australian Alliance were strong performers, with im-proved results from the Group’s niche financial insurance operations.

As a result of the Tyndall acquisition the Group’s funds under management and ad-ministration more than doubled to $7.5 billion. The group also secured full ownership of direct insurer AAMI during the year.

"Whilst we are disappointed with the financial result, we believe that significant groundwork was undertaken during 1999 which will be of considerable future benefit to the group," RSA managing director Mike Wilkins said.

Life insurance premiums nearly doubled to $406 million and operating profit be-fore exceptional items almost trebled to $14 million, from $5 million in 1998. RSA said that improvement was principally the result of the $740 million acquisition of Tyndall Australia group in May 1999.

It said the life risk insurance business of the combined group benefited from an improved expense performance although the full benefit of those efficiencies was offset by a strengthening of reserves in the income replacement area.