RSA UK ‘had the toughest time’ of the group’s units in the first half, says Stephen Hester


RSA’s UK business made an underwriting profit of £17m in the first half of 2017, down 78% on the £76m it made in the first half of 2016.

The result was hit by a combination of the Ogden discount rate cut, higher than expected large claims and home insurance claims inflation.

Group chief executive Stephen Hester said that excluding the Ogden hit, the UK business was still performing “in line with our plan” and UK and international chief executive Steve Lewis hailed his division’s “good momentum”.

The UK combined operating ratio (COR) deteriorated by 4.3 percentage points to 98.7% (H1 2016: 94.4%), as the CORs in all but two of the unit’s individual business lines increased (see table).

RSA UK H1 COR breakdown

 H1 2017 (%)H1 2016 (%)change (points)
Household 98 91 7
Personal motor 99.3 109.7 -10.4
Pet 99.3 100.7 -1.4
Total UK Personal 98.7 97.5 1.2
Property 99.5 86.8 12.7
Liability 95.1 91.8 3.3
Commercial motor 105.1 101.6 3.5
Marine and other 96 93.8 2.2
Total UK Commercial lines 98.7 92.2 6.5
TOTAL UK 98.7 94.4 4.3

The RSA UK underwriting result was hit by the previously announced £42m net charge relating to the cut in the Ogden discount rate as well as higher than expected large claims and claims inflation in personal household, mainly from escape of water claims.

The biggest of the large claims was a £30m bill for a factory in Worcestershire that burned down.

Excluding the Ogden hit, the UK underwriting profit for the first half of 2017 would have been £56m and the COR 95.8%.

Hester said: “Our UK business had the toughest time with Ogden costs, above plan large losses and challenges in household loss ratios. But, excluding Ogden, results were in-line with our plan even here.”

RSA UK net written premiums were up 7% to £1.36bn (H1 2016: £1.28bn). At constant exchange rates, the increase was 5%.

Growth was seen across all lines except commercial motor, where there was a 12% reduction in net earned premiums.

UK and International

The wider UK and international division, which includes Ireland and the Middle East as well as the UK, made an operating profit of £109m in the first half of 2017, down 30% on the £156m it made in last year’s first half.

The drop was caused by the UK: underwriting profits in both Ireland and the Middle East improved.

Ireland returned to underwriting profit in the half, posting appositive result of £2m compared with a £1m loss in last year’s first half.

The Middle East underwriting profit almost doubled to £13m from £7m.

UK and international head Lewis told journalists this morning: “We have got good momentum within the UK and international region, but at the same time there is no complacency: there are areas for us still to focus on and improve.

“We are not where we need to be yet in terms of out ‘best in class’ ambitions but we have got good momentum in terms of heading clearly in that direction.”

Group result

At group level RSA boosted its operating profit by 15% to £360m (H1 2016: £312m) and increased its underwriting profit by 28% to £222m (H1 2016: £174m).

The group COR improved by 1.5 percentage points to 93.2% (H1 2016: 94.7%).