2019 Preliminary Results

RSA Group


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Strong results for 2019

  • Total Group profits up on all measures
  • Record current year underwriting profit, up by £229m

Excluding exit portfolios1:

  • Group underwriting profit £405m, combined ratio 93.6%
  • Underlying EPS 44.5p per share, return on tangible equity 16.0%
  • UK & International region underwriting profit £144m; combined ratio 95.0%

Statutory profit before tax £492m, impacted by exits and other charges
Dividends 23.1p per share, up 10% (final dividend 15.6p)

Stephen Hester, RSA Group Chief Executive, commented:

“We are pleased to report strong results for RSA in 2019. Our profits are up, our dividends are
up and return on tangible equity is very good. This progress is driven by improved underwriting,
which has produced record current year profits and combined ratio.
2019 was an important period for RSA. Significant management renewal and a repositioning
of our UK & International division are showing good promise. Our Group-wide focus on
underwriting improvement with strong cost control proved effective. Yet there is plenty more
we can do to improve each of our businesses for customers and shareholders. There are
challenges, but we are determined to drive further progress and high performance.”

Financial performance


RSA Group: 2019 Preliminary Results

Trading results

  • Underlying profit before tax £624m ex. exits (£565m incl. exits). Statutory profit before tax £492m was up 3% despite the impact of exits and other charges (2018: £480m)
  • Group business operating result £656m profit (ex. exits): Scandinavia £286m; Canada £159m; UK & International £279m (£220m incl. exits). Total Group business operating result £597m profit (2018: £517m)
  • Group underwriting profit of £405m (ex. exits). Total Group underwriting profit £346m (2018: £250m); current year underwriting profit of £314m up £229m vs. 2018
  • Group combined ratio of 93.6% (ex. exits): Scandinavia 87.4%; Canada 94.5%; UK & International 95.0%. Group combined ratio (incl. exits) 94.6%; UK & International 97.1%
    • Group attritional loss ratio2 improved 1 point vs. 2018
    • Group weather costs 2.6% of premiums (2018: 3.7%)
    • Large losses 9.7% of premiums (ex. exits), total 10.0% (2018: 11.6%)
    • Group prior year loss ratio 0.8% benefit (ex. exits), total 0.6% benefit (2018: 2.6%
  • Net written premiums (‘NWP’) of £6,417m, down 1%3 vs. 2018 (down 2%4 underlying but broadly flat4 ex. exits):
    • NWP up 1%4 in Scandinavia
    • NWP up 3%4 in Canada
    • NWP down 7%4 in UK & International as underwriting and rating actions take effect (exits account for c.5 points of the reduction)
  • Group written controllable costs £1,346m (2018: £1,343m). Earned controllable cost ratio 20.9%
  • Investment income of £306m (2018: £322m) down 5% as expected
  • Other charges of £73m include £19m for completion of the UK Legacy sale contracted in 2017 (capital accretive), £15m of accounting impact from a reduction in the discount rate on long-term insurance liabilities in Denmark, and UK restructuring charges of £27m. Losses on UK & International exit portfolios were £59m
  • Statutory profit after tax £383m (2018: £372m)
  • Underlying EPS 44.5p excluding exits (inc. exits: 2019: 39.4p; 2018: 34.1p), statutory earnings per share 32.6p (2018: 31.8p)
  • Final dividend of 15.6p per ordinary share proposed, bringing total dividends for 2019 to 23.1p, up 10% (2018: 21.0p). Payout of underlying EPS (ex. exits) of 52%. Target dividend payout range raised from 40-50% to 50-60% from 2020.
hester2019FYvideojpg Play video
Watch RSA Group chief executive, Stephen Hester, talk through the highlights of our 2019 full year results

Capital and balance sheet

  • Solvency II coverage ratio of 168%5 (31 December 2018: 170%), above 130-160% target range
  • Tangible equity £2.91bn up 1% (31 December 2018: £2.87bn), 282p per share. Shareholders’ equity £3.87bn (31 December 2018: £3.79bn)
  • Underlying return on tangible equity of 16.0% excluding exits (14.2% inc. exits), in the upper part of 13-17% target range
  • IFRS pension surplus £211m (31 December 2018: £182m).

Strategic and market update

  • RSA’s focus is on building capabilities to outperform in our markets. This drives many continuing initiatives – targeted at customer service, underwriting and costs
  • RSA’s particular task for 2019 was to sustain momentum in the large parts of our business that already perform well whilst applying determined actions to improve elsewhere.
    • Our Personal Lines businesses (57% of premiums in 2019) achieved an 88.5% combined ratio for 2019 (ex. exits), sustaining their previous excellence
    • Across our Commercial Lines businesses the current year combined ratio improved by 6 points to 100% (98.6% ex. exits). This was driven by re-underwriting and re-pricing business where needed or lapsing if necessary; we exceeded the pricing and underwriting actions targeted for 2019 which should give further improvements in 2020. However, results in Canada and Denmark remained poor, though are expected to improve sharply in 2020.#
    • Underwriting capabilities 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 has been substantially accomplished and just c.£15m of earned premium remains to run-off. The validity of these decisions was borne out by exit losses and competitor experience in similar lines in 2019.
  • Our UK & International business significantly restructured its management team and operating structure in 2019 with gratifying early results. A programme targeted at removing >£50m costs annually by 2021 is well advanced, with related restructuring costs of c.1.3x (£27m restructuring charge booked in 2019 with the remainder to come in 2020).

Market conditions

  • Insurance market conditions are 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 previously 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 fell c.20-50bps in 2019. 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 2019 compared to the prior period with similar impact likely again in 2020. The UK’s Brexit process is not expected to materially impact RSA beyond any financial market effects.


1 Excluding UK&I exit portfolios, refer to pages 32 to 41 of our press release (PDF) for further information

At constant FX and ex. changes in reinsurance, refer to pages 32 to 41 of our press release (PDF) for further information

At constant FX

At constant FX and excluding changes in reinsurance, refer to pages 32 to 41 of our press release (PDF) for further information

5 The Solvency II capital position at 31 December 2019 is estimated

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 08:30am on 27 February 2020.

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.