RSA profits increase despite falling premium income

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Provider also revealed that it spent £8m restructuring its UK business during Q3.

RSA has stated that its profitability has increased in 2019 in its latest trading update.

A document published by the firm today (7 November) revealed that operating profit had also grown in the first nine months of the year.

The firm also claimed that its combined operating ratio had improved but did not provide a figure. Its H1 results, reported in August 2019, showed a COR of 94.3% and an improved underwriting performance, and indicated recovery from 2018’s shock profit warning.

Stephen Hester, group chief executive at RSA, commented: “RSA’s results to end September are strong, and consistent with our plans for the period. Current year underwriting results have sharply improved, with all our regional businesses contributing. 

“There is lots more to do – not least to finish 2019 well, with momentum into next year.”

Premiums
The growth in profit comes despite falling premium income.

For RSA’s UK and International operations, premium income fell 3%.

The company stated that the fall was “broadly in line with our plans and reflected the impact of pricing and underwriting actions in 2018 and in 2019 to date”.

At group level, net written premium was flat at £4,865m versus the first three months of 2018.

Barrie Cornes, analyst at Panmure Gordon, acknowledged the mixed results when downgrading the provider to investors.

He stated: “RSA has announced a positive Q3 trading update with results to September end described as being strong but lower bond yields remain a challenge.

“Despite the upbeat tone we have updated our model and lowering our target price from 578p to 475p, cutting our recommendation from hold to sell.”

Restructure
The trading update confirmed that RSA had begun restructuring its UK operations.

The company revealed it had spent £8m on the cost reduction programme in Q3.

In September 2019, RSA UK and International announced it had merged its Commercial Risk Solutions (CRS) and Global Risk Solutions (GRS) businesses to create a single commercial division.

Brokers told Insurance Age that they welcomed the decision and expected the move to improve RSA’s relationship with intermediaries.

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