RSA announces strong first half results
- Earnings per share up 18%; interim dividend up 11%; return on tangible equity 16%
- Underwriting result down due to adverse weather, especially in Canada (but up excluding weather impacts).
Stephen Hester, RSA Group Chief Executive, commented:
"RSA is reporting a strong first half. Activity is high across the Group, aimed at building capability to outperform in our markets.
First half underwriting results were below our ambitions due to adverse weather costs. On an underlying basis we showed areas of excellent performance however, and with much we can continue to improve."
RSA Group: 2018 Interim Results
- Statutory profit after tax up 19% to £245m (H1 2017: £206m)
- Pre-tax profits up 12% to £296m (H1 2017: £263m)
- Group operating profit of £304m down 15% (H1 2017: £360m) due to adverse weather, which was £53m in excess of the five year average2. Regional results were: Scandinavia £147m; Canada £25m; UK & International £144m
- Underwriting profit of £171m down 23% (H1 2017: £222m):
- Group combined ratio of 94.7% (H1 2017: 93.2%): Scandinavia 87.6%, Canada 100.5% and UK & International 95.3%
- Attritional loss ratio up 0.4 points but flat net of changes in reinsurance
- Group weather costs elevated at 4.9% versus a benign prior year (H1 2017: 1.2%)
- Large losses improved to 9.7% of premiums (H1 2017: 11.4%)
- Group prior year underwriting profit of £92m (H1 2017: £79m)
- Net written premiums (‘NWP’) of £3,219m down 5%1 but flat net of changes in reinsurance2:
- Headline premiums were dampened by c.£180m of budgeted reinsurance costs, primarily for the triennial Group Volatility Cover (‘GVC’) renewal
- NWP up 1%1 in Scandinavia, with Sweden up 6%1
- NWP up 5%1 in Canada. Scotiabank, one of Canada’s leading retail financial services providers, has agreed to switch its exclusive general insurance partnership to RSA from 2019, giving us an exciting new distribution channel
- NWP down 5%1 in UK & International or 2% net of changes in reinsurance, as underwriting and rating actions (including scheme exits) take effect
- Total Group written controllable costs down 2%1 to £697m. This comprised 4% cost reductions, offset by 2% inflation
- Investment income of £160m (H1 2017: £171m) ahead of guidance but down 6%1 versus last year due to reinvestment at lower yields
- Below the operating result, interest expense more than halved following debt restructuring actions in prior years. As planned, restructuring charges fell away (H1 2017: £100m)
- Headline earnings per share (EPS) up 18% to 21.8p (H1 2017: 18.4p). Underlying EPS2 down 10% to 21.0p due to adverse weather (H1 2017: 23.3p)
- Interim dividend of 7.3p per ordinary share declared, up 11%.
Capital and balance sheet
- Solvency II coverage ratio of 169% after dividend accrual (31 December 2017: 163%), above 130-160% target range
- Tangible equity £2.9bn up 6% (31 December 2017: £2.8bn), 285p per share
- Return on tangible equity of 16.2% (H1 2017: 13.1%) in upper half of 13-17% target range.
- RSA’s focus is on building capability for outperformance in our markets. In that context, our many performance improvement initiatives continue to deliver progress; targeted at customer service, underwriting capabilities and costs
- Financial market conditions have been relatively stable as they impact RSA, albeit with negative foreign exchange impacts of circa 2% in the first half. Political uncertainties in the UK and internationally continue to give the potential for volatility however
- Insurance markets remain competitive overall, with significant variations by region and by product line. Scandinavian markets were relatively stable. In Canada prices are responding to weather and auto loss cost challenges. The UK and ‘London market’ are experiencing soft conditions requiring volume trade-offs for underwriting discipline.
1 At constant FX
2 Underlying measure, please refer to pages 27 to 32 of the full 2018 Interim Results announcement (PDF) for further information.
Investor and analyst presentation
A live webcast of the analyst presentation, including the question and answer session, will commence at 10:30am on 2 August 2018. Register to watch. A webcast and transcript of the presentation will be available here later in the day.
This press release and the associated conference call may contain ‘forward-looking statements’ with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial condition, performance, results, strategic initiatives and objectives. Generally, words such as “may”, “could”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “aim”, “outlook”, “believe”, “plan”, “seek”, “continue” or similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performance. By their nature, all forward-looking statements are inherently predictive and speculative and involve risk and uncertainty because they relate to future events and circumstances which are beyond the Group’s control, including amongst other things, UK domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation or regulations in the jurisdictions in which the Group and its affiliates operate. As a result, the Group’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in the Group’s forward-looking statements. Forward-looking statements in this press release are current only as of the date on which such statements are made. The Group undertakes no obligation to update any forward-looking statements, save in respect of any requirement under applicable law or regulation. Nothing in this press release shall be construed as a profit forecast.