Motor at break-even despite 17% price hikes
RSA made a UK operating profit of £310m in 2011, more than double the £149m it made in 2010.
The improvement was caused by a turnaround in underwriting performance: the company made a UK underwriting profit of £40m in 2011 compared with a loss of £95m in 2011. The UK combined ratio improved by 4 points to a profitable 98.2% (2010: 102.2%).
The UK result also benefited from an 11% improvement in its investment return to £270m (£244m).
The underwriting profitability was mainly driven by personal lines, where the combined ratio improved 8.2 percentage points to 95.7% (2010: 103.9%). While most personal lines were below 100%, RSA’s UK motor business broke even with a combined ratio of 100.7% - though this was a big improvement on 2010’s 105%.
RSA put through personal lines motor rate increases of 17% in 2011 and 6% price hikes in personal household.
The commercial lines combined ratio also improved by 1.1%, but is not yet in profitable territory, just breaking even at 100% (2010: 101.1%). Within commercial RSA is still making underwriting losses on property (combined ratio of 105%) and motor (combined ratio of 104.8%).
In commercial lines, price rises were more subdued than in personal lines: RSA achieved 7% in commercial motor, 5% in liability and 4% in property.
RSA’s UK net written premiums increased 6% to £3.1bn (2010: £2.9bn). This was driven by a 10% increase in personal lines and 2% in commercial lines.
However, the company cut back on mid-market commercial business transacted through its regional offices by 10% because of heavy competition.
Group-wide, RSA’s profits increased 20% to £427m in 2011 (2010: £355m). The combined ratio improved 1.5 points to 94.9% (2010: 96.4%).
In addition to reporting its results, RSA has named former Aspen finance chief Richard Houghton to replace outgoing finance head George Culmer, who will leave RSA ofter the company’s annual general meeting in May.
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