Commercial COR of 104.5% cancelled out profitable personal lines performance

RSA’s UK business has swung to an underwriting loss of £24m in the first half of 2014 from an underwriting profit of £45m in the same period last year.

The UK combined operating ratio (COR) rose by 9.8 percentage points to a loss-making 104.5% from a profitable 94.7%.

The main cause for the deteriorating underwriting profitability was commercial lines, where the COR jumped by 13.1 points to 109.7% (H1 2013: 96.6%).

The personal lines COR deteriorated by five points to a still-profitable 98% (H1 2013: 93%).

Only two of RSA’s seven UK divisions – personal household and marine and other – reported a COR below 100% (see table below).

The UK business also suffered a sharp drop in net written premiums, which were down 18% to £1.3bn (H1 2014: £1.6bn).

The main driver here was also commercial lines, where net written premiums fell 25% to £742m (H1 2013: £992m). Personal lines premiums fell by 8% to £598m (H1 2013: £653m).

Reserve strengthening

RSA attributed its poor commercial underwriting performance to £43m of reserve strengthening. The company had to pump £20m into reserves for professional indemnity business, particularly for the 2008 to 2011 underwriting years.

The company also added £10m to reserves for noise-induced hearing loss claims, where it said claims frequencies continued to fall but slower than expected.

As a result, commercial liability was the worst performing line – its COR jumped by 18.4 points to 121.2%.

In addition, RSA’s commercial property book suffered a £30m loss from the Glasgow School of Arts fire as well as weather losses of £31m.

Premium drop

The 25% drop in commercial net written premium was mainly caused by a fall in premiums from the company’s Motability account, which it restructured last year following a string of losses. Excluding Motability, commercial net written premiums were down by 9%, which RSA said was caused by underwriting and pricing for profit in a competitive market.

The 8% drop in personal lines net written premium was mainly caused by a 39% fall in personal motor premiums to £132m (H1 2013: £215m).

During the half year, RSA pulled the plug on its eChoice online-only direct motor product, exited 800 personal motor broker relationships and ended its arrangement to provide insurance to Ford customers.

RSA said the reduction was also caused by maintaining price discipline in a competitive market.


RSA said that despite the result it had made progress on its pricing and underwriting action. It said it had also reduced expenses, having cut 100 jobs in the UK in the first half.

The company said: “In the UK we will continue on our path to restoring the business to good levels of profitability, which will include completing the announced exits and portfolio remediation, as well as an ongoing focus on reducing costs.”


RSA H1 2014 COR breakdown

 H1 2014H1 2013Change (points)
Personal lines%% 
Total personal98935
Commercial lines%% 
Marine & Other92.790.42.3
Total commercial109.796.613.1
UK total104.594.79.8