Reinvention tension

The fact that Andy Haste has not been seen, let alone interviewed, by the trade press since taking up his present role three years ago says something about the task that has engaged him. And it is probably one that few of his contemporaries envied when, at the time, financial markets punished the insurer for its unknown asbestos liabilities.

But, on this occasion, accompanied by UK chief Duncan Boyle, Haste exudes the conviction and confidence of a man who is pleased with how he has reshaped the company and latterly, he hopes, how it is perceived.

De-risking

This has broadly involved what Haste describes as 'de-risking', including divesting Royal & SunAlliance of its life operation, working through its US legacy issues and raising capital in its balance sheets. Haste also tackled what he calls RSA's legacy culture; imposing a stronger culture of accountability and better performance management, resulting in 50% of its 120-strong management team being 'changed'.

Referring to the culture change RSA has undergone, Boyle says: "While there has been a drive towards performance management and accountability, we were very keen to retain the good aspects of the culture, i.e. that it is a good place to work." Haste adds: "The old RSA functioned like a head office and did not have good communication with staff with no regular reviews. But you have to positively be in the face of your managers to know what's going on to have a hope of controlling things."

But, concerning RSA's all-important standing in the City, and why its share price only seems to rally when there is talk of a bid, he says: "There was a time when uncertainty over US issues was a cause for concern to investors, plus the fact there was no profit since the time of the merger. But there have been strong earnings in the last six to eight quarters and confidence is returning."

While Haste admits there is still work to be done regarding its US liabilities, he is pleased with progress made so far to arrest the threats facing the insurer. Boyle, who bears a proportion of the responsibility for internally reworking RSA, also underlines the significance of work done to date to re-engineer the culture and structure of RSA, which, he says, "lost the plot post-merger."

Going forward, Haste's focus is now moving away from "selling-off bits," a process he says was completed last year. Now his focus lies in ensuring the correct technical price is put in the market and growing its UK, Scandinavian and international businesses. While he stresses that the UK will remain RSA's home and the core of the business, it is looking to expand in the 28 countries in which it currently operates as well as in emerging markets such as Latin America, the Middle East and China.

In terms of group opportunities more generally, Haste says he sees these in Canada, in classes such as marine and with bolt-on acquisitions. He elaborates: "We have a combined operating ratio in the low 90s for marine, having focused on the business we want to do - we have a dominant position on cargo - and it has become a paradigm for the rest of the business." He adds that, by capitalising on existing strongholds such as this and carefully deciding "where we play", this will provide a strong platform on which to build.

Concerning future customer buying habits and, particularly, More Than Business - RSA's direct offering to commercial customers - Haste insists that, while the operation is earmarked for expansion, there are no plans to widen it to risks larger than SME. He explains: "There is no strategy to grow the typical type of customer from SME to larger clients because that is not the way people are shopping." He believes that brokers will continue to be dominant in commercial lines, adding: "I cannot believe that the majority of the business we write directly is profitable for brokers anyway."

When asked from where and who he considers the next big threat to traditional distribution channels will arise, he says the big brand owners, partnership deals and bancassurance will continue to be significant.

Market discipline

Concerning the future market cycle, Haste opines: "In 2006, there has to be a hard market or carriers will be feeling the pain in 2007 if they chase market share at the expense of profit."

He continues: "We have set a clear agenda to underwrite for profit and not to go below technical price." However, this has not been without cost, as RSA declined £100m of business this year, although Haste says this was offset by winning new business. "In the first quarter, there were some pretty irresponsible rates being put out in the market - sometimes up to 40% below, and we will not follow," he asserts.

Haste says this raises issues around how staff are incentivised and draws into question the criteria that constitute 'hitting targets' for some. He adds: "This year, some of our underwriters missed their volume goals as they turned away work - and we are glad they did as they were letting business go that we did not want anyway, which is why they achieved maximum bonuses." On this issue, Haste is hopeful that the regulator will exert some discipline.

His vision for RSA, he says, is a simple one. "We want to run a general insurance business in markets in which we have strong positions and consistently provide a profit for our shareholders," he states.

The challenge of maintaining performance through the cycle is clearly one that Haste has taken to heart but, he adds: "This is not only the challenge for RSA but for the whole sector to show that responsibility."