"Our objectives for the year are unchanged. We will strive to finish 2019 with significant performance gains versus 2018 and evidence carry forward into 2020 of further improvement potential still"
RSA has reported a solid first half performance. Our mission for 2019 is to sustain momentum in the large parts of our business that did well last year, whilst successfully improving the areas that disappointed. Results for the first half show pleasing evidence to support both objectives.
Group underwriting profit is £181m (excluding exits) and consistent with our plans. Results from current year underwriting are up strongly versus H1 2018 and our best in the last 10 years. Progress is even more marked versus H2 2018. Within these totals, attritional loss ratios have improved. Weather losses are also lower but offset by weaker prior year development as 2018 actuarial estimates were refined. Cost discipline remained strong. Our Personal Lines results are excellent, while Commercial Lines need more time to see results improve as targeted and were particularly impacted by prior year ‘true-ups’.
Underlying EPS (excluding exits) is 21p per share as lower investment income dampens the robust underwriting profit. Underlying return on tangible equity is 15% (excluding exits).
Customer focus & market conditions
RSA’s focus is on serving both customers and shareholders well, consistently improving our capabilities in order to do better for both constituencies. In H1 2019 our customer volumes grew, with strong retention and satisfaction indices, in our international Personal Lines businesses where profitability is also strong. In our Commercial Lines businesses, planned exits and underwriting/ pricing action is reducing volumes but targets a stronger, more sustainable business going forward.
Insurance market conditions remain competitive, though business lines facing industry-wide profitability challenges are seeing stronger pricing trends. The insurance industry is also exposed to investment returns, particularly bond yields. Sharp falls in yields year to date across most markets therefore represent a future headwind.
A critical task for RSA is to achieve better and more consistent performance from our UK & International region. We are pleased to report that current year underwriting profits more than doubled and that the H1 combined ratio (ex. exits) was 94.0%, with on-target UK results and helped by unusually strong Ireland and Middle East performance. There is much more to do, in particular to finish the year without the level of London Market losses that cost dearly in 2017/ 2018. In that context, our business exits and other underwriting actions are on track. It will still take some years to get the business to our ambitions for it but our new management team in this division have made a strong start.
RSA’s international businesses continue to perform strongly, driven particularly by Personal Lines. In Canada underwriting profits rose substantially (although less than planned due to another tough winter). Extensive pricing and underwriting actions market-wide are expected to continue the improvement. Commercial Lines remains a challenged area, although we target better H2 results.
RSA’s flagship Scandinavian business continues to perform well though not yet in line with our ambitions. Sweden overall and Danish Personal Lines remain the outstanding performers, with Norway much improved from last year. Danish Commercial Lines remains weak, with continuing underwriting action required.
RSA Group: 2019 Interim Results
Our objectives for the year are unchanged. We will strive to finish 2019 with significant performance gains versus 2018 and evidence carry forward into 2020 of further improvement potential still. Our business will experience challenges from external events not least; we will work hard to meet them with resilience and positive ambition.
Group Chief Executive
31 July 2019
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