RSA has lost 7% of its UK general insurance book, which fell to £754m compared to £811m the year before, its first quarter results reveal. The insurer blamed the drop on the decision to sacrifice volume for a more profitable motor and managed risk book.
Chief executive Bob Mendelsohn said it was a very encouraging performance in the light of the withdrawal from tied agency and direct sales in the UK during the fourth quarter 1999, and the sale of the US life operations at the beginning of the third quarter 1999.
He added that he was confident the RSA group's target of 103% operating ratio for the general insurance market in 2001 was 'realistic and achievable'.
"We have fundamentally changed the business and have a strong grasp of those areas where significant change is still required," he said.
"We expect the rate of improvement towards our target to accelerate later this year."
Worldwide, RSA posts a massive slump in first quarter ordinary activities before tax to £23m, compared to £214m for the same period in 1999. But this takes into account the goodwill amortisation and reorganisation costs of the takeovers.
The group's operating results dropped £8m on the year to £138m.
Mendelsohn said that the decision to return £750m to shareholders had hit investment income, which fell £28m. He added that several acquisitions had distorted the year-on-year comparison.
Worldwide general insurance premiums increased 20% to £2,108m mainly due to acquisitions of Orion in the USA and Trygg-Hansa in Sweden.
Trevor May, an analyst from Salomon Smith Barney, said the negative results would make no difference to the insurer's vulnerability as a takeover target.
He said: "It is only eight weeks since RSA posted its year-end results, so I don't think this will make any difference at all."
May results were on the low side of previous estimates and would force many analysts to revise their full-year forecasts for the insurer.
But he said the composite's strategy was the right one: "In UK motor RSA has increased premiums by around 30% on average. It has also reduced the percentage of young drivers from 20% of its portfolio to 5%. Everyone knows RSA is a big turnaround story, but it needs a few sets of results to prove it."