Royal & Sun Alliance disappointed investors today after posting results at the lower end of market forecasts.
Shares in the general insurer slipped 12 per cent 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."
Royal & Sun Alliance shares stood 9.75p lower at 95.25p in morning trade after hitting 92p earlier.
