RSA battered by huge London market losses as UK disappoints

RSA suffered huge losses in London market, pushing the UK and International business into a disappointing result.

The London Market Speciality and Wholesale business had 2018 premium income of £265m but underwriting losses of £109m.

This shunted UK and international into another poor year, in which its chief executive Steve Lewis departed, with a combined ratio of 104% (2017: 104.3%).

RSA disappointing underwriting

Group underwriting profits fell to £250m (2017: £394), with chief executive Stephen Hester admitting much work was needed to fix the problems.

Overall, operating profits were £517m, around 20% lower than last year and off analysts’ forecasts.

Hester said: “At an underlying level, the results represents 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.”

The UK and International division was particularly poor, clocking up another underwriting loss of £43m (2017: -£82m).

The group jewel in the crown Scandinavia had declining profits of £238m (2017: £315m) amid large commercial losses, but still achieved a respectable combined ratio of 86.8%.

Canada also managed to make an underwriting profit of 97.6%.

RSA taking action in UK 

Hester has vowed to fix the issues in the UK, appointing Scott Egan this year as the new chief executive, and already a number of tough decisions have been taken.

In November, RSA exited portfolios in speciality and wholesale. Generalist MGA were also exited. Together this would have boosted the underwriting result by £120m.

Reinsurance costs have gone up as RSA seeks to cover potential losses. In household, RSA has pumped up rates anyway between 3% and 19% dependng on the channel. 

RSA is also pushing through rate rises in commercial UK, with marine up 6% and motor up 5%.

Despite the problems in commerical, Hester noted that personal lines did well.

Hester said: ”Much went well in 2018, with excellent results in many of RSA’s perosnal lines businesses and good progress on expenses and strategic initiatives.”

The good performance in personal lines helped RSA achieve a group combined ratio of 96.2% (2017: 94%).