28th Feb 2019 08:43
LONDON (Alliance News) - RSA Insurance Group PLC on Thursday reported a consensus beating annual pretax profit but saw a drop in net premiums, struggling with UK and Canada weather related costs and large losses in its London Market business.
Shares in RSA Insurance were down 4.3% in early trading Thursday at 504.00 pence each, sinking to the bottom of London's blue chip index.
The general insurer's net written premiums for 2018 decreased by 3.1% to GBP6.47 billion from GBP6.68 billion in 2017, coming in just slightly below the analyst consensus forecast of GBPGBP6.50 billion.
RSA Insurance's net written premiums were up 2% in Scandinavia and 6% in Canada but its UK & International unit saw a 3% decrease.
Pretax profit increased 7.1% to GBP480.0 million from GBP448.0 million in 2017. Analysts had predicted RSA's profit to decline to GBP417.0 million.
Group operating profit decreased by 22% to GBP517.0 million, behind consensus of GBP561.0 million, from GBP663.0 million in 2017.
The group combined ratio, a measure of underwriting profitability, struggled in 2018 rising to 96.2%, higher than consensus, compared to 94.0% in 2017. RSA's UK & International unit saw its combined ratio hit 101.4%. A combined ratio below 100% indicates profitable underwriting.
RSA's Scandinavian unit posted a combined ratio of 86.8% with the Canada business recording 98.5%.
The group's underwriting profit decreased 37% to GBP250 million from GBP394 million, behind consensus of GBP312 million.
""In 2018 RSA increased headline profits and dividends with a still attractive return on capital. At an underlying level however, the results represent RSA's first down year since 2013. We believe strongly that 2019 will show a bounce back and are taking decisive action to that end," said Chief Executive Stephen Hester.
RSA increased its total dividend by 7.1% to 21.0 pence from 19.6p distributed in 2017.
Hester continued: "Much went well in 2018, with excellent results in many of RSA's Personal Lines businesses and good progress on expenses and other strategic initiatives. However, adverse weather costs and challenging Commercial Lines results exposed us to more volatility than expected. This was most intense in the London Market business which accounted for substantially all our underperformance in the second half."
Group weather costs came in at GBP242 million in 2018, up from GBP168.0 million in 2017. RSA suffered large losses of GBP758 million in 2018, totalling 11.6% of premiums compared to 10.8% in 2017.
The insurer has initiated a series of actions in a hope to return to underwriting profit growth in 2019.
Hester added: "We announced significant portfolio exits and initiated major pricing and re-underwriting programmes during the year. We have also made management changes and increased reinsurance coverage for 2019. Our performance ambitions for RSA are high, and unchanged. We recognise the need to demonstrate resumed progress against them."
Related Shares:
RSA.L