September 4, 2003 by Canadian Underwriter
As part of further restructuring for U.K. insurance giant Royal & SunAlliance Insurance Group, the company says it remains committed to Canada, despite a decision to all but exit the U.S. market.
The company’s standard personal lines and most of its commercial business in the U.S. is being taken over by Travelers. The company says it will focus on the U.K., Scandinavia and Canada. Nonetheless, more than 1,000 jobs will be eliminated in the U.K..The company plans to focus on commercial lines, and direct written personal lines in an effort to drive down the cost of distribution. This means “intermediated” or broker-written business will be cut back to only the most profitable contracts.
The group is facing a review by rating agency A.M. Best on its financial strength (A-, excellent), subordinated debt (bbb) and preferred stock (bbb-) ratings. The company was placed under review with developing implications when it announced a rights issue of 960 million pounds (Cdn$2.1 billion), as well as the restructuring of its U.S. operations. The company also intends to increase its reserves by up to 800 million pounds (Cdn$1.7 billion) in the third quarter of this year, following a review of its general insurance claims provisions by Tillinghast.
The company announced improved results thus far in 2003, with all units except for the U.S. producing an underwriting profit in the second quarter of the year, and its combined ratio improved to 99.3%. In Canada, the second-quarter combined ratio was 94.1% for an underwriting profit of $11 million. For the first half of 2003, the combined ratio was 101.3%. In the company’s statement released Thursday, it notes, “We have continued to drive through significant rate increases, particularly in personal lines, and are seeing a reduction in exposures for many lines as a result. While the results for personal auto have shown substantial improvement there is still work to do and we are actively addressing the issue of our exposure to the industry high risk pool [i.e. the Facility Association].”