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RSA Insurance said operating profits rose by a quarter last year, as the international general insurer draws a line under its three-year turnround programme.
The FTSE 100-listed company reported group operating profit of £655m for 2016, along with a 42 per cent rise in underlying earnings per share to 39.5 pence compared with the previous year. The group also announced record underwriting profits of £380m and a final dividend of 11 pence per share, up from 2015′s 7 pence.
However, net profit fell to just £20m in 2016, from £244m the previous year, due to charges associated with RSA’s disposal of legacy liabilities as the insurer shed itself of non-core assets.
The insurer said earlier this month that its three year turnaround was complete after signing a deal to offload £1bn of old business, strengthening its capital position.
Stephen Hester, who was brought in as RSA chief executive in 2013 after problems were discovered with the insurer’s Irish business, has said he will now focus on operational improvements following the restructuring, which involved cutting costs and selling off non-core assets.
Announcing the preliminary results for 2016, Mr Hester said that industry and financial conditions “will remain tough” but said that the group would now focus on being in ‘best in class’ levels, stating:
The quality of the foundations laid during this period, underpinned by the franchise strengths of RSA’s 300 year history, gave us confidence at the start of 2016 to lay out new ambitions for the future. We now aspire to move RSA’s performance levels towards ‘best in class’ for our markets, for customers and shareholders. If we succeed we will outperform over the coming years.
Mr Hester also offered a positive perspective on the low interest rate environment that has hurt insurers in recent years, pointing out that 2016 had been the first year where RSA’s underwriting profits exceeded its investment income, “a trend we expect to continue”.
The Brexit effect on sterling also helped, RSA said. Over two-thirds of RSA’s revenues come from outside the UK, where sterling devalued substiantially in the latter half of the year.
RSA’s Solvency II coverage ratio – a core measure of the insurer’s capital strength – was 158 per cent at the end of the year, at the upper end of its range.