Vision and strategy

RSA is a focused international insurer. We have complementary leadership positions in the major general insurance markets of the UK, Scandinavia and Canada, together with supporting ‘London market’ and international business.

The Group is well balanced between personal and business customers, across our geographies, product lines and distribution channels.

Our business strategy is to sustain a disciplined focus on RSA’s existing areas of market leadership, whilst driving intense operating improvement in pursuit of best-in-class performance levels.

2017 actions

2017 was another year of intense activity at RSA. The great majority of our efforts were focused on operational improvement in pursuit of our best-in-class ambitions. We also delivered the final pieces of RSA’s balance sheet restructuring successfully. We look forward to 2018 as the first clean ‘business as usual’ year since 2012.

Financial strength

RSA’s ‘A’ grade credit ratings are where we want them. The Solvency II capital ratio at 163 percent (2016: 158 percent) is in a good place. The £834m disposal in February of our UK Legacy insurance liabilities removed a source of long-tail risk whilst funding a £640m retirement of high cost subordinated debt capital. This was the final piece of balance sheet work on our agenda. While we aspire to grow ‘core tier 1’ capital coverage further, the active phase of balance sheet repair is now complete.

Business improvement

Our goal is to systematically and determinedly hunt down performance improvement opportunities across the business to move RSA’s capabilities and then outcomes towards best-in-class levels. This involves particular focus on improving three areas: service to customers, underlying underwriting results and cost efficiency.

Personal Lines policy count rose at RSA in 2017 for the first time in four years as customers reacted positively to the many improvements we are putting through. The important home partnership with Nationwide commenced business in December. Operational initiatives also contributed, spanning service improvements via digital capabilities in claims and policy servicing, through to capability and proposition uplifts across our business lines.

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

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.

Looking forward

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.

The statements above are an extract from the Group Chief Executive's statement published in our 2017 Annual Report and Accounts