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RSA Group reports $75 million net claims cost for Fort McMurray wildfire in 2016 interim results


August 6, 2016   by Canadian Underwriter


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RSA Insurance Group plc has reported a net claims cost of 39 million pounds – or $75 million – for the recent Fort McMurray wildfire and 35 million pounds for the United Kingdom and European floods in June in its 2016 interim results for the first half of the year.

Financial analysis“The first half was impacted by the Alberta wildfires, the largest natural catastrophe in Canadian history,” RSA Group said in its 2016 Interim Results, released on Thursday. “Our reinsurance programme limited our exposure to a net claims cost of CAD$75m/£39m,” the report said, adding that “the weather ratio was therefore elevated at 6.6% (c.2.3 points worse than long-term averages). Large losses were 6.3% driven by a higher than expected level of large claims in Commercial.”

For Canada, the combined ratio was 94.5%, up from 92.3% in H1 2015, compared to a Core Group combined ratio of 94.3% (H1 2015: 96.4%).

Net written premiums (NWP) for Canada were 420 million pounds in Personal lines and 189 million pounds in Commercial lines (total=609 million pounds) in the first half of 2016, compared to 627 million pounds in the first half of 2015 (at constant exchange rates). “Canadian premiums were down 3%, with Personal down 5% and Commercial up 1%, reflecting underwriting discipline in competitive market conditions,” RSA said in the interim report.

In particular, Canada’s NWP for Household were 168 million pounds in H1 2016, compared to 173 million pounds in H1 2015 and 252 million pounds for Personal Motor, down from 274 million pounds in H1 2015. Property NWP were 73 million pounds in the first half of the year, the same as 2015; Liability was 44 million pounds (48 million pounds in H1 2015); Commercial Motor was 51 million pounds in H1 2016 (46 million pounds in H1 2015); Marine & Other was 21 million pounds in H1 2016 (23 million pounds in H1 2015).

RSA1Total Core Group NWP were 3.029 billion pounds (1.506 billion pounds for Personal, 1.523 billion pounds for Commercial) for H1 2016, compared to 2.947 billion pounds in H1 2015, up 3% year-on-year at constant exchange rates. Net earned premiums for the Group were 3.271 billion pounds in H1 2016 compared to 3.579 billion pounds in H1 2015.

The company reported a record H1 Group underwriting profit of 174 million pounds, up 72% from 101 million pounds in the first half of 2015. The prior year underwriting profit was 55 million pounds compared to 28 million pounds in the first half of 2015, “driven by Canada and the U.K. in particular,” RSA said in a statement.

In its outlook for Canada, RSA said that it expects premiums reductions to moderate slightly in the second half of 2016, although the company will continue to prioritize underwriting discipline. “We expect the attritional loss ratio improvement seen in the first half (which partly benefited from benign ‘attritional weather’) to moderate in the remainder of 2016,” the report said. “Our focus continues to be on operational improvement (in underwriting, claims, technology and process simplification) and cost reduction.”