The insurer paid out £259m in group-wide claims costs pertaining to the coronavirus pandemic
RSA has reported that its 2020 premium income fell by £166m as a result of the Covid-19 pandemic – it attributed this drop to “a range of customer driven coverage changes, volume impacts and specific premium relief schemes across our different territories”.
This figure forms part of the insurer’s 2020 full year financial results, published today.
RSA further reported that the estimated net impact of the pandemic, including premiums, claims and investment income effects, has caused a £42m drag on the business’s operating result.
Regarding Covid-19 claims in 2020, RSA booked group-wide claims costs, including incurred but not reported reserves, of £259m.
Furthermore, following the Supreme Court’s judgment in the FCA’s business interruption test case in January, RSA added that its gross loss reserving for 2020 has increased, but it “does not currently expect the net loss estimates in relation to the policies before the court to change materially from those previously reported”.
RSA was one of the insurers involved in the High Court and Supreme Court proceedings.
Stephen Hester, RSA Group chief executive, said: “Naturally, the impact of Covid-19 was the major feature of our year, as for society as a whole.
“We prioritised the safety of our employees and sustaining service to customers. The group paid out some £4.6bn in ‘normal’ claims whilst also providing for over £250m in Covid-19 specific claims, together with offering a range of other customer support measures.”
Hester predicts this will be his final financial update for RSA “assuming the takeover bid by Intact/Tryg completes as expected in the coming months”.
On the deal, RSA said: “The recommended bid for RSA by Intact in consortium with Tryg was approved by RSA shareholders in January and good progress is being made in satisfying the various conditions to closing.
“It is presently estimated that closing is likely to occur during Q2 2021, subject to the conditions being satisfied.”
For 2020, RSA has reported a 36% improvement in its group underwriting profit, from £346m in 2019 to £502m last year. Its underlying profit before tax has also increased by 15% to reach £718m as at 31 December 2020. However, statutory profit before tax fell by to 2% to reach £483m, which RSA said is driven by Covid-19, bid costs, exits and restructuring.
The group’s total business operating result grew by 15% to stand at £703m at the end of 2020 – for the insurer’s UK and international business specifically, this figure is £200m.
RSA’s group combined ratio in 2020was 91.1% - for the UK and international, combined ratio was 98.5% including exits.
Last year, personal lines accounted for 56% of RSA’s net written premiums (NWP), while commercial lines contributed 44% of NWP. Overall, NWPs amounted to £6,220m, excluding the £166m impact of Covid-19. Factors that affected RSA’s NWPs include “price reductions, refunds, coverage changes and specific business line volume impacts” – these caused a 3% drop compared to 2019.
In the UK and international business, NWP was down by 2% excluding the estimated impact of Covid-19, or down by 5% overall.
Other figures RSA reported on include £78m towards UK cost base restructuring and losses on UK and international exit portfolios amounting to £48m.
In addition, non-coronavirus-related claims in 2020 dropped by between 9% and 34%, which the insurer said provided “partial mitigation to the negative impacts for Covid-19 claims, investment income reductions and lower premiums”.
End of a chapter
Speaking on the results overall, Hester added: “We are pleased to report excellent results for RSA in 2020. Underwriting profits are sharply up to new record levels and return on tangible equity has risen above our target range.
“The group has delivered on large parts of our ‘best in class’ ambitions. The quality of earnings is excellent, which augurs well for RSA’s prospects in 2021 and beyond. I am proud of the hard work, dedication and focus of all my colleagues in what was a difficult and turbulent year.
“We have built a high performing company and 2020’s results showcase the value creation thereby achieved. This in turn drove the 52% premium we were able to negotiate in Q4 through an all-cash bid from Intact and Tryg. The offer is on track to complete in the coming months, ending a chapter for RSA but not the whole story.”