RSA’s most important capability lies in our underwriting judgement. Across the Group multiple improvements continued in areas like portfolio discipline, data and model improvement, machine learning and skills enhancement.
Attritional loss ratios improved in every business except the UK. Here our attritional results experienced significant setback, largely through Household ‘escape of water’ claims, which we expect to rectify for 2018/ 2019. The Group attritional loss ratio was slightly better than prior year as a result, not quite as good as hoped for although still substantially better than historically achieved. See our 2017 Annual Report and Accounts for more details on our 2017 financial performance.
Cost efficiency remains a critical performance lever. We have now achieved £395m annual gross savings and are able to raise our savings targets for a fourth time to over £450m by 2019.
Digitisation, lean operations, site consolidation, enhanced purchasing, robotics, zero based budgeting – all the tools in modern corporate armouries to boost people productivity – are being deployed effectively across our regions.
Our performance target of 13-17 percent return on tangible equity represents attractive shareholder return both relative to cost of capital and insurance industry norms.
To the extent that RSA’s underwriting performance progresses well towards our best-in-class combined ratio ambitions, even better returns are possible. We will try to achieve just that. For 2018, the key tasks are to re-establish respectable performance in our UK business whilst continuing underlying progress in our overseas markets where the majority of the Group trades.