Canadian Underwriter

RSA Group reports record 2016 underwriting profit of 380 million pounds and record combined ratio of 94.2%

February 24, 2017   by Canadian Underwriter

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RSA Group has reported a record Group underwriting profit of 380 million pounds for 2016 – up 73% from 220 million pounds in 2015 – and a record Group combined ratio of 94.2% compared to 96.9% in 2015.

RSA also reported in its financial results released on Thursday a Group operating profit of 655 million pounds last year, up 25% from 523 million pounds in 2015: Scandinavia at 311 million pounds, Canada at 140 million pounds and the United Kingdom at 259 million pounds.

The Core Group combined ratio for 2016 for Scandinavia was 86.2%, 94.9% for Canada and 95.4% for the U.K.

RSA further noted a record Group current year underwriting profit of 271 million pounds last year compared to 129 million pounds in 2015. The Core Group attritional loss ratio was 1.4 points better than last year, while weather and large losses 0.3 points worse, RSA said in a statement. Group prior year underwriting profit was 109 million compared to 91 million in 2015. Core Group premiums were up 6% for the year to 6.3 billion pounds.

Total Group net written premiums (NWP) for full year 2016 were 6.4 billion pounds, down from 6.8 billion pounds in 2015. By jurisdiction, NWPs for 2016 were 1.72 billion pounds for Scandanavia, 1.44 billion pounds for Canada, 3.1 billion pounds for UK & International at 36 million pounds for “Central functions.” Regional trends for 2016 included Canadian premiums up 6%, though down 3% at constant fx with Personal down 4% and Commercial flat, “reflecting underwriting discipline in competitive market conditions,” the statement said.

Looking at Canada specifically, Household NWP were 445 million pounds for 2016, up from 421 million pounds in 2015, while Personal Motor NWP were 549 million pounds last year, up from 529 million pounds in 2015.

Canadian Property NWP for last year were 194 million pounds, up from 176 million pounds in 2015; Liability NWP were 102 million pounds for 2016 compared to 99 million pounds in 2015; Commercial Motor NWP were also 102 million pounds, up from 85 million pounds in 2015; Marine & Other NWP were 51 million pounds, similar to 50 million pounds in 2015. Total Commercial NWP for Canada were 449 million pounds, up from 410 million pounds in 2015.

“We have had a strong and resilient year in Canada, absorbing our share of losses from Fort McMurray, the largest natural catastrophe in Canadian history, yet still delivering an underwriting profit of 74 million pounds and [combined operating ratio] of 94.9%,” the statement said.

However, conditions in Canada still remain competitive, particularly in the commercial broker channel, RSA noted, saying that its priority “continues to be on sustained underwriting discipline.”

Overall, Canadian personal premiums were down 4%, driven by rate reductions in Personal Motor and lower volumes. “Premium reduction trends have been gradually moderating and Q4 2016 saw flat premiums overall.”

The statement noted that the Canadian underwriting profit for the year of 74 million pounds (compared to 116 million pounds in 2015) “was in line with our expectations, even after absorbing the impact of the Fort McMurray wildfire losses in May where our reinsurance programme limited our exposure to a net claims cost of 42 million pounds. The weather ratio was therefore elevated at 5.7% (1.4 points worse that long term averages). Large losses were higher than expected at 6.4%, driven by a small number of large claims in Commercial Property.”

Speaking about RSA’s results overall, Stephen Hester, Group chief executive, said in that statement that “in 2016, RSA took major strides forward, moving seamlessly from ‘successful turnaround’ to organic outperformance. Our ambition now is to drive RSA’s performance towards ‘best in class’ levels. Industry and financial market conditions will remain tough. We plan to outperform through continuing self-help measures on customer service, underwriting and costs.”