RSA Insurance Group Plc has released its preliminary results for 2018… and, based on the statement of group chief executive Stephen Hester, it looks like they’re not entirely pleased.
While the London-headquartered group recorded a higher net attributable profit last year – £326 million, up from 2017’s £269 million – full-year figures revealed a massive hit when it comes to underwriting.
In 2018 RSA saw an underwriting profit of £250 million, which was a steep fall from the £394 million it enjoyed previously. In addition, it registered a combined operating ratio of 96.2% last year – a poorer showing from 94% in 2017.
Commenting on the numbers, Hester noted: “In 2018, RSA delivered growth in profits and earnings per share, further dividend growth and underlying return on tangible equity of 12.6%, substantially above our cost of capital.
“However, for us 2018 was a disappointing year since RSA posted the first decline in underwriting profits since 2013, driven primarily by higher weather costs and a range of loss challenges in our commercial lines businesses, most notably through our London Market results. While we can never be immune from external volatility, we have taken decisive action to address these losses and expect a good recovery in 2019.”
According to the CEO, the London Market business accounted for substantially all of RSA’s underperformance in the second half of 2018. To address its underwriting woes, the insurance group initiated significant steps last year.
“In personal lines, the primary challenge was weather volatility which is hard to specifically manage,” explained Hester. “Canada was our worst affected territory. Auto lines claims inflation also remains a market challenge. Extensive rate increases are going through in affected portfolios, together with selected broker cancellation where rate alone is unlikely to have the required result.”
As for commercial lines, the RSA boss believes more extensive action is required.
“We announced portfolio exits for circa 50% of our London Market business and the two remaining UK generalist MGAs,” he said. “Across all our remaining commercial lines businesses, underwriting action and rate increases are being deployed against underperforming areas.
“And for 2019 we have added new reinsurance aggregate covers aiming to reduce large loss volatility in each of our regional businesses.”
