RSA, the British home and motor insurer, showed it had settled into post-turnround life as it carried forward strong momentum from 2016 to report operating profits were ahead of plans in its quarterly update.
The FTSE 100 group on Thursday reported a 14 per cent rise in net written premiums for the first three months of the year compared with the same period in 2016, to £1.7bn, boosted by sterling weakness. Stripping out the effect of the weak pound, premium income was up 4 per cent.
The update is the first since chief executive Stephen Hester announced he had completed RSA’s three-year restructuring programme in February with a deal to offload £1bn of old business which strengthened the group’s capital position.
Mr Hester said RSA was “a bright spot in a sector that has otherwise been a bit flat”.
Despite market conditions it described as “largely unchanged”, the group said it increased both volumes and prices in the quarter and grew premiums in its main markets of Canada, Scandinavia and the UK. The only region where premiums fell on a constant currency basis was Ireland, which represents less than 4 per cent of premiums, where the company said it had raised prices to improve profitability.
In Thursday’s short trading update the company did not disclose details of quarterly operating profits.
The growth in overall premiums marks an improvement on the 2016 full-year figures: while results came in ahead of expectations in February, total net written premiums dropped 6 per cent because of policy volume declines. RSA slimmed down its business substantially during its turnround, undertaking a series of disposals and sacrificing premium income with the hope of increasing profitability, but said that process was now complete.
The insurer also said it had avoided a hit to profits from the changes to UK rules about compensation payments to victims of road accidents, announced in late February, which are expected to result in substantially higher claims costs for insurers than anticipated. The move prompted rival Direct Line to pull a special dividend earlier this year, but RSA said a net charge of £40m, which took the total provided so far to £85m, was “more than offset” by improvements in reserves in other parts of the business.
Barrie Cornes, an analyst at Panmure Gordon, said the results were “good” and RSA “were doing all the right things”, but added some analysts were not convinced there was much more the company could do.
“The turnround has been exemplary. It has been a case study on how to turn a business round,” he said. “Now [Stephen Hester] has to do the hard graft of improving what is fundamentally three good businesses, eking out incremental performance.”
Mr Hester said the group would now be focusing on a wider move to use technology to improve productivity and cut costs as part of its “drive for outperformance”. He said RSA was using more sophisticated tools, including geospatial technology to assess which areas were most susceptible to winds and floods and machine learning to identify new correlations, to improve its underwriting, and was working to make it “less hassle” for customers to buy policies online.
Shares in RSA closed up 2.48 per cent to 619p.
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