Personal lines player has been hit by rising cost of bodily injury claims
RSA UK chief executive Adrian Brown has praised the group’s 2009 performance, despite a 3% drop in net written premium in the UK.
Brown said the results were excellent given the context of the recession, and pointed to the group’s strong international performance, which saw an overall increase of 4% in net written premium, to £6.7bn.
In the UK, RSA posted a combined operating ratio (COR) of 98%, a slight deterioration from 97.6% in 2008. UK underwriting profits were £75m, compared with £99m in 2008, and investment returns were £238m, down from £317m in 2008.
Globally, RSA Group posted a COR of 94.6%, with an operating profit of £777m.
Brown said the 5% drop in UK commercial business – from £1.62bn in 2008 to £1.54bn in 2009 – was because of the economic downturn. RSA had estimated the total premium reduction from the recession to be £150m, but Brown said it managed to hold on to about half of this business through a series of special initiatives.
Like other big players in personal lines, RSA took a hit on the rising cost of bodily injury claims. Brown said this had been limited to £30m, because RSA had taken early action to counter rising costs. He said: “The hit to our result is fairly small compared with some of the other numbers being thrown around.”
Brown declined to comment on which competitors had got it wrong, but said: “When it comes to bodily injury costs, you have to be massively up to date on claims; that’s one of the things you have to watch like hell when you are cutting expenses and headcount.” He added that RSA had been proactive in managing claims and countering fraud.
Brown said RSA had held its line on rates. For example, the insurer added 12% on broker and new business, and 19% on new business through its direct internet portal More Th>n.
Asked whether Aviva’s return to the corporate market could affect rates, he said: “We will watch with interest what Aviva does. We would hope given their results that they will come in with pricing discipline. It’s not something that has caused me concern to date, but clearly they are a serious competitor and it’s something we will have to keep an eye on.”
In the SME arena, RSA is targeting growth with a new product going live every six days throughout 2010. Growth in this area is focused on electronic trading, with multimillion-pound investment over a period of two years.
RSA is also on target with its cost reductions, having shed 1,200 jobs as announced in February 2009, and made £64m of cost savings, leaving it on target to deliver £70m of savings by the end of the first quarter 2010.