How RSA plans to shore up its personal lines results in Canada

Expect RSA in Canada to take remedial underwriting actions in its personal lines portfolio – including auto rate increases of between 3% and 16%, and potentially selected broker cancellations – in order to shore up results after a tough year of property losses in 2018.

“Insured damage for severe weather events in 2018 reached $1.9 billion for the [Canadian P&C] industry, the fourth-highest loss year on record,” RSA International Group plc noted in its remarks about last year’s annual results. “Relative to peers, our book is slightly weighted towards property risks, which are more exposed to weather events.”

RSA also saw its share of fires within its personal lines portfolio. “Increased frequency and severity in mid-sized losses (particularly fire) impacted [the] household [insurance line],” the company reported.

Although personal lines results were “excellent” in many of RSA International Group’s businesses, Canada was hit hardest by the property losses, the company reported. “Extensive rate increases are going through in affected portfolios, together with selected broker cancellation where rate alone is unlikely to have the required result.”

Canada’s 71.5% loss ratio in 2018 was highest among RSA International Group’s business segments, including Scandinavia, UK & International, and Central functions. (The Central functions segment includes the company’s internal reinsurance function and Group Corporate Center.)

At 6.8%, RSA Canada’s weather loss ratio made up about 10% of the company’s overall loss ratio in Canada.

“In personal lines, the primary challenge was weather volatility, which is hard to specifically manage,” RSA International Group reported. “Canada was our worst affected territory. Auto lines claims inflation also remains a market challenge.”

RSA reported elevated loss counts in both private passenger auto lines and within certain segments of commercial auto.

“The attritional loss ratio of 58.1% [representing the loss ratio for non-catastrophe events] increased by 1.3 points [in 2018],” the company reported. “The attritional ratio was steady in personal auto, as rate and claims initiatives struggled to outpace inflation.

“Ontario and Alberta make up the majority of our auto premiums and we have applied almost 10% of rate in these provinces in the last 18 months. Additional rate is targeted in 2019 of between 3% and 16%, depending on the province and channel, and subject to regulatory approval.”

While the Canadian arm of RSA reported an operating profit of £84 million (about Cdn$148 million) and a combined ratio of 97.6% (after net global value chain, or GVC, recoveries), the operating profit was down significantly from its £153 million [approximately Cdn$270 million] result posted in 2017.

Canadian premiums were up 2% at reported foreign exchange rates, and up 6% at constant foreign exchange rates. The region continued a positive growth trend seen in 2017, with personal lines PIFs (policies in force) up 1% and commercial lines volumes up 1% (excluding rate).

“Retention [in Canada] is performing particularly well with both Johnson, our direct and affinity channel, and personal broker improving over the last year to 90% and 89% respectively. Johnson continued to grow organically, achieving growth of 4% in 2018.”

RSA was positive about a recent bancassurance partnership with Scotiabank, announced in August. Based on the new partnership, RSA expects to “start writing new business in Q2 2019, with renewals following in Q3.”