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RSA Canada reports $286 million in insured losses from three severe weather events in 2013


February 27, 2014   by Canadian Underwriter


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Royal & Sun Alliance Insurance Company of Canada announced Thursday that three severe weather events last year resulted in insured losses in 2013 of $286 million for RSA Canada, while net written premiums increased 11% year over year.

Meanwhile, RSA Group described its global financial results in 2013 as “poor,” adding it plans to “reduce its geographical spread” outside a core group. That core group would include UK & Ireland, Canada, Scandinavia and Latin America, where RSA Group says RSA is a “leader” in those markets.

RSA Canada’s underwriting result of $16 million in 2013 “was impacted by severe weather, including the floods in Alberta and the Greater Toronto Area (GTA), which were the first and third most costly weather events in Canadian history, as well as by the ice storms that hit the GTA in December,” the company stated in a press release.

The carrier was referring to flooding in late June that inundated downtown Calgary and High River, among others, as well as the July 8 rainstorm in Toronto.

Also on Dec. 21-22, 2013, Environment Canada records indicate that freezing rain fell most of those days, at Toronto Pearson International Airport, with a total of 16.6 mm of rain Dec. 21 and 13.6 mm of rain Dec. 22. At the height of the storm, about 300,000 of Toronto Hydro’s 796,000 customers were without power.

Those three events resulted in $286 million in insured losses, resulting in net losses of $151 million for RSA Canada, the company stated Thursday.

Its combined operating ratio was 99.3% in 2013, up 5.7 points from 93.6% in 2012.

“While 2013 was a record year for severe weather in Canada, our core business remains strong,” stated Rowan Saunders, President & CEO of RSA Canada, in a press release. “The severe weather may have negatively impacted results, but I am extremely proud of the exceptional support we provided to customers and brokers from coast to coast.”

“In 2013 we supported our customers through an unprecedented number of severe weather events”. “In 2014, I expect our COR to return to the mid-low 90s, to see growth in line with the market and to continue providing the best service to our customers and brokers.”

RSA Canada also reported 11% growth in net written premiums to $2.826 billion in 2013, “benefiting from the acquisition of L’Union Canadienne.” RSA closed its $150-million acquisition of L’Union Canadienne — from Co-operators General Insurance Company — October 1, 2012.

Personal lines premiums at RSA Canada were up 11% in 2013 to $1.921 billion, “including a 7-point benefit from the L’Union Canadienne (UC) acquisition,” the firm stated. “Growth in Personal lines of 4% was driven by Household, with rate increases across most provinces and strong growth in the Western region.”

Premiums in commercial lines were up 9% year-over-year to $905 million in 2013, “primarily driven by large corporate accounts and Global Specialty Lines (GSL).”

RSA Canada added: “Commercial market remains very competitive with soft pricing conditions.”

RSA Group reported Thursday, in its preliminary 2013 results, that its underwriting profit was £57 million last year, down from  £358 million in 2012. The group’s combined operating ratio was 99.6% in 2012 up from 96.8% in 2012.

The British Pound was worth $1.86 Thursday.

RSA had an underwriting loss of £220 million in Ireland, resulting from “irregularities in the claims and finance functions and reserve strengthening.” Those irregularities prompoted reviews by both PwC and KPMG, RSA noted Thursday.

“RSA’s 2013 results are poor and we need to grasp the nettles of both underperformance and undercapitalisation,” stated Stephen Hester, Group Chief Executive of RSA, in a release.

” As part of this we intend to launch a rights issue to help ensure we have the appropriate level of capital behind the Group. Together with a series of significant ‘self-help’ measures, we believe this will put the Group’s capital in the right place for the future.”

“We believe that RSA can be a strongly performing company within our industry. Today we are announcing determined action plans designed to achieve that goal. Our core businesses, our 19m customers and our dedicated staff provide key assets to base this work upon.

RSA noted its “geographical spread will reduce considerably,” over “the next few years,” outside a “core group” comprised of the UK & Ireland, Canada, Latin America and Scandinavia.

“Our businesses in the UK & Ireland, Canada, Scandinavia and Latin America are leaders in their respective markets and offer the potential for good returns and premium growth,” RSA stated in a release.

“In the UK, we have the opportunity and need to improve our performance and have already started this journey, although there is more to do and our UK businesses face tough competitive markets. Low interest rates are set to restrain Group investment income for some time.”