7th May 2020 09:09
(Alliance News) - RSA Insurance Group PLC said Thursday the first quarter of 2020 was "strong", with the insurance market conditions "largely unchanged".
Shares in the FTSE 100-listed insurer were up 4.3% in London on Thursday morning at 385.40 pence, the best performer in the blue-chip index.
Net written premiums were down 1% year-on-year in the quarter, excluding exits, but down 2% including exits.
RSA said the slip in the three months to March 31 was in line with internal expectations, as the insurer noted areas of profitable growth were offset by planned underwriting effects in portfolios being remediated. RSA said this process is "nearing its conclusion".
In its UK & International unit, premiums were down 5% to GBP572 million, excluding exits, which was ahead of RSA's own expectations. The insurer said this reflected the impact of underwriting actions in 2018 and 2019.
"Key areas targeted for expansion such as our Regions commercial business, and UK household saw positive volume growth," RSA added.
In Scandinavia, premiums were down 3% to GBP610 million, reflecting portfolio actions in Danish Commercial Lines, partly offset by Personal Lines growth.
In Canada, premiums increased 8% to GBP303 million, driven by pricing increases and volume growth in direct Personal Lines, RSA said, while its broker intermediated businesses saw volume contraction reflecting underwriting actions.
The insurer noted all three of its regions performed on or ahead of plan.
"RSA's first quarter results were strong, continuing the momentum seen in 2019," Chief Executive Stephen Hester said.
The insurer said its business operating profit in the first quarter rose by "double digit percentages", with an improved combined ratio and slightly lower investment income.
"However, focus has now naturally shifted. Our thoughts and deepest sympathies go to those most directly affected by Covid-19," Hester added.
RSA said Covid-19 hit its balance sheet but did not hurt operating profit, given the timing of lockdowns late in the quarter.
Hester continued: "RSA is resilient and determined to sustain strong and appropriate support for our customers in these testing times. We are also very conscious of our shareholder responsibilities, especially with regards to restarting dividend payments when it is prudent to do so."
At March 31, RSA's estimated Solvency II cover ratio stood at 151%, down from 168% at the end of 2019. RSA attributed the drop to market impacts and planned pension contributions, including the 2019 final dividend. Excluding the final dividend, the ratio stood at 160%.
The financial market volatility in the period resulted in a GBP30 million impairment charge, RSA said.
Elsewhere, RSA's underwriting profit was hit by weather costs totalling 3.7% of net earned premiums, up from 3.2% the year before, but better than expected.
Weather costs were better in Canada and worse for the UK & International division due to February flooding in UK.
RSA's large loss ratio was 8.9%, versus 8.5% last year, with improvements in Canada offsetting a higher ratio in UK & International.
The insurer said it is performing "resiliently" in the second quarter, but it is still too early to fully quantify the hit from Covid-19.
April claims have dropped between 20% to 55% across RSA's three regions.
"Scandinavia frequency decline was at the lower end of this range reflecting milder lockdown impacts. In general, motor accident lines were most affected, though most business lines saw meaningful declines," RSA said.
From March to April-end, RSA estimates receiving a total of 25,000 Covid-19 related claims, of which about 23,000 are travel claims, on which its coverage will have to pay out - costing an estimated GBP25 million net of reinsurance.
By Paul McGowan; [email protected]
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