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RSA warns on higher than expected losses

Underwriting losses were biggest in the UK
October 4, 2018

Shares in RSA Insurance (RSA) fell sharply after the insurer warned that large and weather-related losses were higher than expected in the third quarter of the year.

IC TIP: Hold at 587p

All regions experienced higher claims, but the UK and Canada were the most affected. The UK and London underwriting business made a £70m loss, taking the combined ratio out to 110 per cent. This rather took the shine off what was otherwise a solid performance, with Scandinavia, Ireland and the Middle East all trading profitably in the third quarter. And while claims were higher in Canada, it was still trading profitably, with a combined operating ratio of 94.5 per cent.

However, attention is likely to focus on the UK, where improvements in household and commercial property business were not enough to offset a deterioration in motor and marine insurance. Even so, on current estimates, the group’s solvency ratio at the end of the third quarter is expected to be around 172 per cent against 163 per cent at the end of 2017. Analysts at Panmure Gordon have reduced their earnings estimate for 2018 from 49.4p a  share to 43.1p.