- Premium income up 4% to £6.7 billion, combined ratio 94%, a new RSA record
- Underlying EPS 43.5p, up 10%; statutory profit after tax £322m (2016: £20m)
- Return on tangible equity1 15.5% (2016: 14.2%) versus 13-17% target range
- Final dividend 13.0p per share (19.6p total for 2017, up 23%)
Stephen Hester, RSA Group Chief Executive, commented:
"In a tough period for insurance markets, we are delighted to produce another year of growing profits, dividends and return on equity for shareholders. Higher premium income also highlights the positive customer response to what we are offering.
"RSA’s overseas divisions achieved excellent results in 2017, partly offset by poor underwriting figures in our UK/ London market business as flagged earlier in the year. The Group’s performance ambitions remain high and we target further improvement in 2018 and thereafter."
RSA Group: 2017 Preliminary Results
- Underlying pre-tax profits up 12% to £620m (2016: £556m)
- Group operating profit £663m up 1% (2016: £655m): Scandinavia £389m; Canada £159m; UK & International £133m2
- Group underwriting profit of £394m up 4% and a new record for RSA (2016: £380m):
— Group combined ratio of 94.0% also a record (2016: 94.2%): Scandinavia 82.9%, Canada 93.9% and UK & International 100.5%2
— Attritional loss ratio improved by 0.1 point versus 20163 with good progress in all businesses except the UK
— Group weather costs in line with last year; large losses elevated at 10.8% of premiums (2016: 8.9%)
— Group prior year underwriting profit of £157m (2016: £109m)
- Total Group premiums of £6.7bn up 4% at reported FX and up 2% at constant FX excluding disposals: Scandinavia up 0.3%, Canada up 5% and UK & International up 2% (all at constant FX)
- Group written total controllable costs down 6%3 to £1,425m. This comprised 8% cost reductions, offset by 2% inflation
- Investment income of £331m (2016: £369m) down 10% versus last year reflecting the impact of disposals and ongoing reinvestment at lower yields
- Below the operating result, interest expense halved following our debt restructuring. Restructuring costs of £155m (2016: £168m) support the existing and increased cost savings targets
- Statutory profit after tax £322m (2016: £20m)
- Underlying earnings per share (EPS) 43.5p, up 10% (2016: 39.5p). Headline EPS 26.3p (2016: 1.8p)
- Final dividend of 13.0p per ordinary share proposed, bringing total 2017 dividends to 19.6p per ordinary share (up 23%) representing a 45% payout ratio of underlying earnings.
Capital and balance sheet
- Solvency II coverage ratio of 163% after final dividend (31 December 2016: 158%), slightly above 130-160% target range
- Tangible equity £2.8bn (31 December 2016: £2.9bn), 270p per share
- Return on tangible equity of 15.5%1 (2016: 14.2%) in upper half of 13-17% target range.
- Balance sheet restructuring is now complete. 2017 actions comprised the £834m disposal of UK Legacy liabilities (announced in February); issuance of c.£300m of restricted tier 1 notes in Scandinavia and the retirement of c.£640m of existing high coupon debt. These actions reduced risk, improved capital resilience, and lowered interest costs
- RSA’s entire focus is on the drive 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
- The improved premium trends we report for 2017 reflect the service enhancements we have been implementing. Pleasingly, trends are better in every region versus 2016
- Underwriting capabilities continue to advance across the Group. These include more sophisticated and agile pricing models, underwriter training and portfolio discipline, and technology driven insights. Progress on attritional loss ratios can be volatile but is on track overall, except for UK Household where improvement measures are in train. Underwriting actions to improve large loss performance are being actively implemented - 2017 setbacks showed the need to remediate in places
- Group written controllable costs for 2017 were down 6%3 year-on-year to £1,425m (comprising 8% cost reductions, offset by 2% inflation). Group headcount was down 6% versus 2016 and 23%2 since the beginning of 2014. We are raising our savings ambition for a fourth time and now target over £450m gross savings by 2019 (£395m achieved to date). We do not expect to book further ‘below the line’ restructuring costs to achieve these savings
- Excellent progress has been made towards our best-in-class combined ratio ambitions across the Group, except in the UK. Scandinavia and Canada have passed the targeted threshold, although in both regions we see scope for further improvements. Ireland has returned to underwriting profit (COR 97%) and we expect good continued progress. In the UK, our performance ambition remains unchanged, although its achievement may take longer than originally hoped. Determined action is underway in order to get back on track
- Insurance market pricing and volumes have started 2018 with comparable trends to 2017, save for classes particularly impacted by poor loss experience
- Bond market yield increases, if sustained, allow upgrades to investment income outlook plus reduced capital drag from bond pull-to-par impacts. Conversely, vigilance will be needed to price for any changes in insurance claims inflation.
An alternative view of 2017
If numbers aren't your thing, check out our 2017 highlights from across the group in pictures
1 Underlying measure, please refer to pages 30 to 36 of the press release for further information
2 Proforma for share of aggregate reinsurance recoveries and excludes the impact of the Ogden rate change
3 Group excluding disposals for 2016 and at constant FX
Investor and media enquiries
Investor and analyst presentation
A live webcast of the analyst presentation, including the question and answer session, will be broadcast on the website at 09:00am on 22 February 2018.
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.