Stephen Hester, the former banker drafted in to run RSA this year, stood by his plans to cut the FTSE 100 insurer’s cost base by at least £180m even as its premium income came under further strain.
The ex-Royal Bank of Scotland chief, who is undertaking a wide-ranging restructuring of RSA after it was beset by an accounting scandal, told investors they would probably need to wait another year or two before the insurer increases its top line again.
More than 1,000 jobs are already at risk as Mr Hester plans to cut RSA’s annual expense base by at least £180m, about a tenth of its total.
However, the chief executive said he was not planning “major changes to our targets”. “If you lower costs in a stupid way you can impact customer services or do other things that can hit you,” he said.
The scale of RSA’s retreat from big lines of business and the pricing pressure it is under was underscored on Thursday when the insurer disclosed it had written £5.7bn worth of premiums in the first nine months of 2014, down 9 per cent from a year ago.
RSA did not provide quarterly profit numbers but cautioned its underwriting result would be “weak”. Recent storms in Scandinavia have cost £26m and a hailstorm in Alberta, Canada, another £11m.
The premium decline was bigger than some analysts forecast, pushing shares in Britain’s biggest non-life insurer by market value down almost 5 per cent to 460.1p.
“Weaker than expected top-line growth negates the impact of planned cost savings,” said Oliver Steel, analyst at Deutsche Bank, who lowered profit forecasts for next year by 3 per cent.
Pressure was most intense in RSA’s highly-competitive domestic market, where the insurer trades as More Than. In the UK, premiums fell almost one-third year-on-year at its personal motor business and more than two-thirds at its commercial vehicle insurance operation.
Elsewhere, the strong pound weighed on RSA’s overseas businesses, although assuming currencies had been constant premiums written ticked up at its large Scandinavia and Latin America operations.
The disposal programme is largely complete, although the board also deems smaller assets in the Middle East and joint ventures in Thailand and India as “non-core”.
The insurer, which undertook a £775m rights issue earlier this year to rebuild its balance sheet, raised £400m through a subordinated bond issue last month as part of an effort to refinance more expensive debt.
“Everyone thinks that we’re doing the right things,” Mr Hester added.
The update on Thursday comes about a year after RSA disclosed bookkeeping problems at its Ireland business that left it with a £200m black hole in its accounts.
The insurer has blamed former executives in the republic for overstating profits. Regulators are continuing to investigate but RSA has already provisioned for a fine expected to run into millions of pounds.
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