Royal & Sun Alliance, Britain's second-largest commercial insurer, pushed up profits before exceptional items by 41 per cent to £333 million in the first half, helped by claims-reducing good weather and a "disciplined" approach to underwriting.

The insurer, which two months ago unveiled plans to axe 1,500 jobs, said it had achieved its aim of saving £270 million in expenses ahead of schedule. It said it had embarked on its plan to deliver a further £130 million of savings annually by the middle of 2008.

In the six months to June, net written insurance premiums worldwide for Royal & Sun rose by 2 per cent to £2.83 billion, with a fall in UK written premiums to £1.28 billion being offset by a stronger international and Scandinavian performance.

Group operating profits were up by 24 per cent at £409 million and the insurer's efficiency level - measured as the "combined operating ratio" - was running at a healthy 91.7 per cent.

Profits from underwriting rose 31 per cent to £171 million.

Today's first half results were at the top end of City expectations and the shares held steady despite the heavy wider falls triggered by news of foiled terror attacks.

Andy Haste, the chief executive, said all areas of the business were performing well. But he singled out the insurer's success in turning round the troubled American division, while highlighting continued tough competition in the UK market.

"The core group underwriting result of £171 million is a £40 million improvement over [the first half last year] reflecting our disciplined approach to underwriting and claims along with favourable weather," Mr Haste said.

"The UK is still our most competitive market and we remain commited to underwriting discipline and maintaining technical price," he said.

In the United States, where Royal & Sun was hard hit by a rash of asbestos-related claims, losses of £24 milliion at this point last year were turned into profits of £6 billion for the six months to the end of June.

The shares lost just 0.5p to 133p, a fall of 0.37 per cent against a FTSE that was down by more than 1 per cent.

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