RSA Insurance reports first half of 2014 ‘challenging for our Canadian business’

RSA Insurance Group plc released Wednesday its financial results for the first six months of 2014, reporting a worldwide combined ratio of 100.8%, an 8% increase in household premiums in Canada and a 5% drop in commercial premiums in Canada.

Worldwide, London-based RSA Group reported net written premiums of £3.93 billion for the six months ending June 30, down from £4.652 billion in the first half of 2013. The British Pound was trading at $1.84 Canadian Aug. 6.

RSA Group’s net incurred claims were £2.8 billion during the first half of 2014, down from £2.831 billion during the same period in 2013. In Canada, RSA reported net incurred claims of £542 million in the first half of this year.

Canadian results were affected by the rise in the British Pound relative to the Canadian dollar between the first half of 2013 and the first half of this year. The average exchange rate was $1.57 in the first half of 2013 and $1.83 for the first half of this year, RSA Group noted in a release.

In Canada, RSA reported net premiums written of £727 million, down from £866 million in the first half of 2013 (or £743 million at a constant exchange rate).

Worldwide, RSA Group’s combined operating ratio was 100.8% in the first half of 2014, up 6.2 points from 94.2% during the first half of 2013. The group had “an underlying level profitability” that was “broadly in line” with expectations, the insurer said in a release.

In Canada, the combined operating ratio improved a tenth of a point, from 98.7% in the first half of 2013 to 98.6% in the first half of 2014.

“After a record year for weather events in Canada in 2013, adverse weather conditions continued into the first quarter of 2014,” RSA stated. “As a result, H1 2014 has been challenging for our Canadian business, however, we delivered an underwriting profit of £12m and a combined ratio of 98.6%. The underlying performance of our Canadian business remains strong.”

For the first half of the year, RSA reported net written premiums in Canada of £185 million in household (up 8% at a constant exchange rate from the first six months of 2013) and £299 in motor (down 5% at a constant exchange rate).

“Household premiums included rate increases of 8% driven by both our Johnson and Broker businesses whilst volumes were flat,” RSA Group said of its Canadian business. “In Motor, premium reductions were due to the exit of unprofitable brokers and lower new business in Ontario in our Johnson business as we reshape portions of the affinity portfolio.”

In commercial in Canada, RSA Group reported net written premiums of £243 million, of which £107 million was in property (down 4% year-over-year at a constant exchange rate), £63 million was in liability (down 7% year-over-year at a constant exchange rate), £48 million in motor (down 6% year-over-year at a constant exchange rate) and £25 million was in marine and other (unchanged at a constant exchange rate).

“In Commercial lines, premiums were down 5% to £243m driven mainly by the management actions we have been taking on the portfolio, particularly where we have been re-underwriting or exiting poorer performing accounts,” RSA Group said of its results in Canada in the first six months of 2014. “Property reductions of 4% are mainly due to underwriting actions in Quebec, whilst Liability contraction of 7% follows the exit of unprofitable programs and market leading rating action.”

RSA Group’s loss ratio was 70.8% in Canada and 69.8% worldwide during the first six months of 2014. The commission ratio was 14% in Canada and 15.3% worldwide, up from 13.6% in the first half of 2013. The expense ratio was 13.8% in Canada and 15.7% worldwide, up from 14.7% in the first half of 2013.

Worldwide, RSA Group reported a profit after tax of £6 million in the first half of this year, down from £190 million in the same period in 2013.

“While first half profits are modest, they reflect further balance sheet and reserve clean-up as well as above normal weather costs,” Stephen Hester, RSA’s group chief executive, said in a release.

In early 2014, RSA said it would “reduce its geographical spread” outside of a “core group” comprised of Britain, Ireland, Canada, Scandinavia and Latin America.

Then on Aug. 6, Hester reported in a release that RSA’s “strategy reset” is “ahead of schedule.”

“Disposals of our businesses in the Baltics, Poland, Noraxis in Canada, and China have all been agreed,” Hester stated. “The businesses are going to good new owners and at attractive values for our shareholders. Further disposals are targeted over the next 12-18 months to complete the process.”