Solid first half results, underwriting actions 'on track'

  • Current year underwriting profit up 70%

Excluding exit portfolios1

  • Group underwriting profit £181m
  • Group combined ratio 94.3%; underlying EPS 21p per share
  • UK & International region underwriting profit £86m; combined ratio 94.0%

Statutory profit before tax £227m, impacted by exits and non-operating charges

Interim dividend 7.5p per share, up 3% vs. H1 2018


Stephen Hester, RSA Group Chief Executive, commented:

“RSA is reporting a solid first half 2019. Particularly pleasing is the improvement in current year underwriting results, which represent our best first half in the last 10 years1. Our Personal Lines business continues to drive this performance.
While the full earned effect of underwriting, pricing and portfolio changes will show next year, at this stage we are on or ahead of schedule in each region for those planned actions. There are some headwinds from lower bond yields and weaker prior year development and we have more to do in many areas. Nevertheless, we expect to make continued progress overall.”

Financial performance

Stephen Hester, Group Chief Executive, RSA Insurance Group

RSA Group: 2019 Interim Results

Trading results

  • Underlying profit before tax £292m (ex. exits). Statutory profit before tax £227m was impacted by exits and non-operating charges (H1 2018: £296m)
  • Group operating profit £308m (ex. exits): Scandinavia £127m; Canada £50m; UK & International £155m (£127m inc. exits). Group total operating profit £280m (H1 2018: £304m)
  • Underwriting profit of £181m (ex. exits). Group total underwriting profit £153m (H1 2018: £171m). Current year underwriting profit up 70% vs. H1 2018
  • Group combined ratio of 94.3% (ex. exits): Scandinavia 89.1%; Canada 97.8%; UK & International 94.0%. Group combined ratio including exits 95.2%; UK & International 96.1%:
    • Group attritional loss ratio2 improved 0.6 points vs. H1 2018 and by 1.62 points H2 2018
    • Group weather costs 3.2% (H1 2018: 4.9%) of premiums
    • Large losses 9.6% of premiums excluding exits, total 9.9% (H1 2018: 9.7%)
    • Group prior year underwriting profit of £19m (H1 2018: £92m)
  • Personal Lines (57%3 of net written premiums) combined ratio was 89.9% (ex. exits), while Commercial Lines was 98.8% (ex. exits)
  • Net written premiums (‘NWP’) of £3,254m, up 1%4 H1 2018 (down 2%2 underlying but up c.0.5%2 ex. exits):
    • NWP up 2%2 in Scandinavia
    • NWP up 4%2 in Canada
    • NWP down 8%2 in UK & International as underwriting and rating actions take effect (exits account for c.6 points of the reduction)
  • Group written controllable costs £694m (H1 2018: £697m). Earned controllable cost ratio 21.3%
  • Investment income of £154m (H1 2018: £160m) down 4% as expected
  • Non-operating charges include £17m for completion of the UK Legacy sale contracted in 2017 (capital accretive) and £15m of accounting impact from a reduction in the discount rate on long-term insurance liabilities in Denmark. Losses on UK/ London market exit portfolios were £28m
  • Statutory profit after tax £183m (H1 2018: £245m)
  • Underlying EPS 20.9p excluding exits (inc. exits: H1 2018: 21.0p; H1 2019: 18.6p), headline earnings per share 15.3p
  • Interim dividend of 7.5p per ordinary share proposed, up 3% (H1 2018: 7.3p) and consistent with dividend policy.
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Watch RSA Group chief executive, Stephen Hester, talk through the highlights of our 2019 interim results

Capital and balance sheet

  • Solvency II coverage ratio of 167%5 (31 March 2019: 164%), above 130-160% target range
  • Tangible equity £2.92bn up 2% (31 March 2019: £2.88bn), 283p per share
  • Underlying return on tangible equity of 15.0% excluding exits, within the 13-17% target range
  • IFRS pension surplus £164m (31 December 2018: £182m). Fall in bond yields increases estimated full year 2019 capital impact of bond ‘pull-to-par’ to c.£70m.

Strategic and market update

  • RSA’s focus is on building capabilities to outperform in our markets. In that context many initiatives continue – targeted at customer service, underwriting and costs
  • RSA’s 2018 underwriting results declined for the first time since 2013. Consequently, our particular focus for 2019 is to progress restorative actions, whilst sustaining momentum in the large parts of our business that continued to perform well:
    • Across our Commercial Lines businesses, programmes are underway re-underwriting and re-pricing business where needed and possible, or lapsing if necessary; much of the pricing and underwriting actions targeted for 2019 have already been implemented. However, results will take more time to show the benefits we expect
    • Underwriting capabilities more broadly continue to receive intensive focus across the Group. These include more sophisticated and agile pricing models, underwriter training and portfolio discipline and technology driven insights
  • In our 2018 Preliminary Results, we confirmed London Market portfolio exits and other business lapses targeted at reducing unprofitable business and risk exposures by c.£250m vs. 2017 NWP baseline. This will have been substantially accomplished by the end of 2019 and just c.£30m of earned premium remains to run-off in H2 and c.£10m thereafter. We will continue to review market conditions in the remaining portfolios and adjust further if merited.

Market conditions

  • Insurance market conditions remain competitive across our territories with significant price/ volume trade-offs. However, rate hardening and capacity adjustment is helping us re-price in Canada and in loss-making international business lines
  • Financial market conditions are volatile, driven by political developments and their knock-on to monetary and economic trends. RSA is relatively well protected with conservative investment portfolios and a broad array of internationally derived profits. However, bond yields have fallen c.50bps in most of our territories in H1 2019. If sustained this will reduce future investment income in addition to its ‘pull to par’ impact on capital usage. FX movements also have a translation effect on RSA, costing c.2% at underwriting profit level in H1 2019 compared to the prior period.


Excluding UK/ London Market exit portfolios, refer to pages 30 to 38 for further information

2 At constant FX and ex. changes in reinsurance, refer to pages 30 to 38 for further information

 Split for year ended 31 December 2018; 

At constant FX

5 The Solvency II capital position at 30 June 2019 is estimated

Media enquires

Investor and analyst presentation

A live webcast of the analyst presentation, including the question and answer session, will take place on 1 August 2019. Register to watch. A webcast and transcript of the presentation will be available here later in the day.

Important disclaimer

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.