RSA 2020 Interim Results

RSA Group


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  • Group business operating result up 13% vs H1 2019
  • Group underwriting profit £240m1 up 33%
  • Group combined ratio 92.2%1; underlying EPS 23.5p1 per share
  • Statutory profit before tax £211m down 7% due to COVID-19 market related impacts

Stephen Hester, RSA Group Chief Executive, commented:

“RSA is reporting good growth in underwriting profits for the first half from continued business improvement actions. COVID-19 impacts on operating profits were broadly neutral in H1, though related financial market charges reduced our statutory results.
Each region of RSA contributed in line or better than our plans, driven by improved attritional loss ratios. We are pleased with progress towards our “best in class” ambitions, and the underwriting performance which is a first half record for RSA.
COVID-19 has dominated recent months. Uncertain times put a special premium on sustaining customer service whilst operating safely and securely for our people and other stakeholders. This has been our focus and will remain so over the rest of the year. The recovery path from the pandemic itself is not yet certain, as well as its human and economic consequences. Nevertheless, we see good prospects for RSA remaining resilient and emerging strongly from this period.”

Financial performance


RSA Group: 2020 Half Year Results

Trading results

  • Underlying profit before tax £332m1 up 14%. Statutory profit before tax £211m down 7% impacted by COVID-19 financial market impacts

  • Group business operating result of £349m1 up 13%: Scandinavia £164m; Canada £88m; UK & International £148m1. Group total business operating result of £316m (H1 2019: £280m). In aggregate, the net impact of COVID-19 from premiums, claims and investment income effects is neutral

  • Group underwriting profit of £240m1 up 33%. Group total underwriting profit £207m (H1 2019: £153m)
  • Group combined ratio of 92.2%1: Scandinavia 83.2%; Canada 93.2%; UK & International 93.6%1. Group total combined ratio 93.3%; UK & International (including exits) 96.0%:

    • Group attritional loss ratio1 improved 4 points vs. H1 2019 of which 2.5 points are COVID-19 related
    • Group weather costs 3.4%1 of premiums (H1 20191: 3.0%)
    • Large losses 9.9%1 of which 0.9 points COVID-19 related (H1 20191: 9.6%)
    • Group prior year underwriting profit of £18m1 after £6m of COVID-19 related provisions (H1 20191: £26m)

  • Personal Lines (55% of net written premiums) combined ratio 86.0%1, Commercial Lines 96.8%1
  • Net written premiums (‘NWP’) of £3,136m1, down 3%2 vs. H1 2019. We estimate that COVID-19 reduced NWP by c.£110m (3%), consisting of price reductions, refunds, coverage changes and specific business line volume impacts. Group NWP was on plan ex COVID-19 impacts. In total:

    • NWP down 1%2 in Scandinavia
    • NWP up 3%2 in Canada
    • NWP down 8%1,2 in UK & International

  • Group written controllable costs down to £680m (H1 2019: £694m). Earned controllable cost ratio 21.9%

  • Investment income of £134m down 13% after £6m COVID-19 impacts

  • Other charges include £54m of mark to market losses/impairments/discount rate change relating to COVID-19 market volatility and £18m for UK cost base restructuring as guided.

  • Losses on UK/ London market exit portfolios were £33m reflecting one large “bau” claim, certain COVID-19 international construction claims and increased prior year reserves

  • Statutory profit after tax £164m (H1 2019: £183m)

  • Underlying EPS 23.5p1 is up 12%, statutory earnings per share 13.5p down 12%

  • Consistent with the 2019 final dividend suspension in April, an interim dividend for 2020 is not presently being announced. RSA expects to resume dividends as soon as judged prudent, which absent unforeseen events should be by the time of full year results 2020. We also aim to catch up on missed dividend payments over time consistent with prudent capital management.
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Watch RSA Group chief executive, Stephen Hester, talk through the highlights of our 2020 half year results.

Capital & balance sheet

  • Solvency II coverage ratio of 172%3 as stated, 158%3 including proforma dividend accruals for full year 2019 and H1 2020 (31 December 2019: 168%), versus our 130-160% target range

  • Tangible equity £3.17bn up 9% (31 December 2019: £2.91bn), 307p per share

  • Underlying return on tangible equity of 16.7%1, within the 13-17% target range

  • IFRS pension surplus £328m (31 December 2019: £211m). Fall in bond yields increases estimated full year 2020 capital impact of bond ‘pull-to-par’ to c.£80m.

Strategic and market update

  • RSA continues to benefit from a settled and consistent strategy. The focus is on building capabilities to outperform in our selected markets. In that context many initiatives continue, targeted at improving customer service, underwriting and costs

  • From the base of strong 2019 results, the tasks for 2020 were around sustaining momentum in the large parts of our business that perform very well whilst focusing on driving remedial action in weaker performing areas. This latter principally involves completing the portfolio exits announced in 2018, building our UK performance track record (including reducing its cost base) and improving Danish and Canadian commercial lines results:

    • In our UK domestic business, normalising for weather which hit results in H1, there has been sustained improvement into 2020 though with more to do. The exit portfolios are substantially run off (though with some tail exposures left) and the business is refocused and operating with greater clarity and intensity. Business simplification and cost improvements are vital and the programme which started in H2 last year will be expanded further this year, not least to offset top line threats from a weak economy. In both Canada and Denmark, good progress continues in commercial lines pricing and underwriting with strong attritional gains and large loss improvements starting to come through also.


COVID-19 impacts

  • While the impacts of COVID-19 on RSA are ongoing, we discuss the principal areas affected below with data for H1:

    • Financial market movements will continue to affect balance sheet, solvency ratios, pension surplus and investment income. Data as at end June is presented above.

    • Our priority is to sustain good service to customers. RSA is working hard to settle claims promptly and fairly and where relevant to offer interim payment to support customers, as well as sustaining supply chains similarly. We are also providing a range of customer relief measures across our different territories, ranging from coverage adjustments and waivers, payment timing relief and discount or price capping of rates. We are participating fully in industry initiatives including exploring future pandemic coverage options and voluntary relief funds.
    • Claims impacts are complex to interpret as claims patterns are distorted by the impact of lockdowns. It is still too early to have settled trends or to know the full timing and pattern of pandemic impacts, government actions and their economic effects. Encouragingly all of our territories have begun a steady normalisation though we do not yet know how this will play out.

    • For the second quarter 2020 non COVID-19 claims frequency was down vs prior year in a range 15-60%, mostly reflecting lower economic activity levels. Frequencies increased in June as lockdown easings began. It is not yet possible to fully assess the impact on claims severity of disrupted supply chains or on timing of claims notifications. However, we can see that frequency effects overall will provide a material offset to areas of negative COVID-19 impact on premiums, costs and claims. The first half claims reserving calculations show frequency benefits broadly matched with COVID-19 claims costs and premium reductions resulting in a neutral overall impact to the business operating result at Group level after building some cautionary reserves for the uncertainties described above.

    • Most business interruption coverages are not expected to be eligible under their terms for COVID-19 claims. However, there are a number of areas where claims are being paid. In addition, RSA is one of 8 participants in the FCA “test case” on business interruption coverage wordings in the UK, the result of which may also have wider implications for the industry in this sector. We are not able to comment on this process at present, beyond confirming that RSA’s position on its BI wordings is supported by external legal advice.

    • In H1 2020 RSA booked c.39,000 travel claims with estimated costs of £26m but £1m net of reinsurance and 2,700 claims for wedding cancellation, with an estimated cost of £9m. In addition, we have received claims under Business Interruption coverages with case reserves and actuarial IBNR of £47m (of which £7m relates to delayed construction projects). The development since our reporting on 7th May, represents the receipt of some additional claims but primarily the completion of reserve reviews which has led to revisions to ultimate estimates and IBNR to the up to date values provided here.

    • The great majority of the non-travel claims relate to our UK&I division. Claims backlogs at period end were within normal tolerances overall.

    • Away from the reinsurance coverage on travel claims, we expect most other COVID-19 related claims can be aggregated by week and applied against the Group’s GVC programme if over £10m, and against the Group’s Cat programmes if reaching higher levels. This is expected to provide substantial protection in relation to downside claims scenarios. So far, these coverages have not been applied. Please see page 28 for further details of the GVC and Group Cat programmes.

    • There is also a COVID-19 effect on premium income for 2020, which has so far totalled c £110m in H1. This results from a range of customer driven coverage changes, volume impacts and specific premium relief schemes across our different territories. We continue to monitor any increase in credit risks arising from customers experiencing financial difficulties as a result of weaker economic conditions and are actively working with those in most need on payment deferral plans. In H1 the bad debt charge did not increase materially, however.

    • RSA itself was able to adjust well to substantially all employees working from home and is only cautiously beginning to return to office working in certain territories so far. While there are areas of service slippage, in general business as usual remains the norm. We have prioritised health and welfare of our staff and have not taken part in government furlough programmes.


1Excluding UK/ London Market exit portfolios, refer to pages 33 to 42 of our PDF for further information

2 Constant FX, refer to pages 33 to 42 of our PDF for further information

The Solvency II capital position at 30 June 2020 is estimated

Investor and media enquiries

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.