An annual report Q&A with Stephen Hester

As part of our 2018 annual report, we asked our Group chief executive, Stephen Hester, some questions about our business strategy.

2018 annual report


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To mark the launch of our 2018 annual report and accounts, we asked our Group chief executive, Stephen Hester, to share his thoughts on business strategy.

RSA's strategy is to build up best-in-class capabilities. Why do you see that as the best course to follow?

Like many other industries, personal and commercial insurers operate in relatively mature and consolidated business lines, and without patents. The result is that undiscovered market segments are rare and leading players operate with very similar business models. Despite this, there are widely differing performance levels across competitors. The most successful are set apart by consistently superior and focused execution, rather than a differentiated strategy.

RSA is set up as a leader in three complementary geographies, with excellent business balance. This gives us the focus and platform to succeed. We aim to create and sustain high performance through consistent development of our customer appeal, underwriting skills and cost efficiency to achieve best-in-class performance in each of our markets.

Insurance markets present a range of challenges from natural catastrophes to high levels of competition and overcapacity in some areas. How is RSA responding to these challenges?

We exist to absorb losses on behalf of customers when needed, and so underwriting will always be the key battleground for general insurers. To be there for our customers as well as succeed for our shareholders, we need advanced skills in risk assessment and pricing, strong discipline in portfolio management and balance in our business. In addition, we can actively use reinsurance markets to further manage volatility. But all this has its limits. We are inescapably in a capital deploying, risk absorbing business that will have some volatility.

As outlined in our annual report 2018, RSA is intensively managing its portfolio to move away from business areas and individual risks that offer poor returns and expand where we can grow profitably. We are steadily advancing our underwriting and pricing skills and tools, using the best of modern data science and insights. And, reinsurance purchases have been increased to mitigate particular areas of volatility.

Stephen Hester discusses our business strategy

Is technology a threat or an opportunity for RSA?

The evolution of mankind is a story of growth and development through automation and greater information usage. At every stage, opportunities have outweighed threats but there have always been both losers and winners. Insurance is the original ‘data science’ industry and if we fail to make the most of technology and data to improve, we will fall back. Across all our businesses we are determined to grasp technology’s opportunities in our mission to perform well for customers and shareholders. It is a tool to enhance customer service and convenience, it helps us to improve underwriting and pricing speed and accuracy, and it enables us to simplify and automate business processes.

Where do you see growth coming from?

Our business can only do well in those areas where we combine serving customers well with attractive profitability for shareholders. Our industry is relatively mature and unlikely to grow fast. We therefore see growth not as a primary target, but as an outcome of success in delivering for our customers and shareholders. We are growing in many parts of our business where the combination is right – for example, Personal Lines in Sweden and Denmark and our Johnson business in Canada. In other areas, such as London Market Specialty and Wholesale Lines, we are trimming back activities in the face of difficult market conditions. Here, our goal is to rebuild the shareholder result, so we have a stable platform to grow customer business once more.

Financial performance


Annual Report and Accounts 2018