A drop in restructuring costs boosted headline figures at RSA Insurance (RSA), but even after taking these into account, underlying pre-tax profits were up 12 per cent at £620m, and despite another tough trading period, the combined ratio of claims to premium income improved to a record 94.0 per cent.
The group’s continued restructuring swallowed £155m and is now complete. These costs were £50m higher than originally planned, but there was still a fourth increase in the cost-savings target to over £450m by the end of 2019. Actions taken in 2017 included the £834m disposal of UK legacy liabilities and the retirement of around £640m of high coupon debt. In addition, headcount was down 6 per cent.
RSA makes the majority of its profits outside the UK, and the UK’s performance provided the only real disappointment, with a combined operating ratio of 100.5 per cent. This reflected reinsurance exposure to hurricane and earthquake damage in the US and Mexico and also the effects of a change in compensation payments as governed by the Ogden rate.
However, operating profits in Scandinavia increased by a quarter to £389m, driven principally by a robust underwriting performance, while the combined ratio was best-in-class at 82.9 per cent. Canada performed particularly well because despite lower prior year reserve releases and higher large loss claims, operating profits grew by 14 per cent.
Shore Capital previously forecast net tangible assets of 282p for December 2018, but downgraded its estimate by around 7 per cent on these results.
| RSA INSURANCE (RSA) | ||||
| ORD PRICE: | 632.4p | MARKET VALUE: | £6.47bn | |
| TOUCH: | 632.4-632.6p | 12-MONTH HIGH: | 673p | LOW: 569p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 401p* | COMBINED RATIO: | 94% | |
| Year to 31 Dec | Gross premiums (£bn) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p) |
| 2013 | 9.10 | -203 | 504 | 10.2 |
| 2014 | 7.30 | 53 | 471 | 2 |
| 2015 | 6.86 | 106 | 381 | 10.5 |
| 2016 | 7.22 | 101 | 347 | 16 |
| 2017 | 7.60 | 448 | 350 | 19.6 |
| % change | +5 | +344 | +1 | +23 |
| Ex-div: | 1 Mar | |||
| Payment: | 18 May | |||
| *Includes intangible assets of £763m or 75p a share | ||||
