Weather accounts for only part of eightfold rise, chief says

Adrian Brown RSA

Marked improvement in RSA’s H1 results is as much due to management action and discipline as to change in Britain’s weather, UK and western Europe chief executive Adrian Brown says.

Underwriting profit for the group’s UK business leapt more than eightfold to £73m in the first half from the £10m loss recorded over the same period last year. Its combined operating ratio (COR) fell by 7.5 percentage points to 93.1, while net written premiums rose 3% to £1,537.

“I’m particularly pleased with the bottom line performance, and this is where I believe you can see the benefit of the management actions we’ve been taking over the past few years coming through,” Brown said.

“Clearly weather has been better this year than last year and that has obviously helped us, but [for us] a lot of it is about our underwriting and pricing discipline and that has shone through in the results.”

In this year’s first half, total claims due to bad weather were some £40m to £50m less than in H1 2012 – which saw severe flooding - and £9m better than the five-year average.

“We have continued to take some quite tough action over the past year in pulling unprofitable portfolios and making sure we are pushing rate, where rate is needed,” said Brown.

“We have been turning around our commercial results and I am very pleased with the progress we have made. We’ve seen good top-line growth with premiums up 6% to £884m, coupled with greatly improved profitability.”

The premium increase was driven mainly by rate rather than volume and RSA had achieved rate increases of 4% on property, 5% on liability and 3% on motor. It recently renewed its Motability contract on more favourable terms.  

The underwriting profit in commercial was £25m compared with a loss of £19m in 2012, while the motor book made gains on last year’s loss of £28m but remained in negative territory with a £7m loss.

Brown said RSA pulled out of motor trade and risk-managed motor because of limited potential for long-term returns. The commercial market as a whole was still underpriced by about 10% compared with the rates needed to make a long-term return.

In personal lines, net written premiums were down by 1% to £653m, with underwriting profits up by 23% to £48m and a COR of 93. Household grew 3% while motor fell 4% and pet 8%.

Brown said the marginal decrease in the top line was largely because of motor, which was a “very difficult” market but he remained determined not to chase premium over profit.

“There are stats out that show motor prices are down by about 10%,” he said. “We’ve not been prepared to follow the market down on rate as much as some of our competitors, which has led to a reduction of 4%.

 “We think we have a real advantage in both household and pet insurance and we are continuing growing both those portfolios and producing very strong results,” Brown added.