RSA cuts its losses in UK motor trade

RSA has decided to pull out of writing business in the UK mid-market motor trade sector and also sell its Fyfe business.

According to RSA UK commercial boss Jon Hancock, the move follows a period of poor results in its motor business.

On closer inspection of RSA’s 2012 first half results, the insurer’s UK commercial motor business was its worst performing UK line. It reported a stubbornly high combined ratio of 108% at the first half (H1 2011: 107.2%) – caused by continuing losses from a single account - and posted an underwriting loss of £21m (H1 2011: £18m).

This was one of the attributing factors in causing RSA’s commercial business underwriting loss to double to £14m.

So, it is no surprise that RSA is taking action to remedy this part of the business.

But it is not the first time that RSA has taken action in the mid-market. Back in February, UK chief executive Adrian Brown said fierce competition for regional mid-market business is prompting a lack of underwriting discipline and causing some players to withdraw. The insurer revealed in its annual results that it had pulled back capacity from mid-market commercial business because of heavy competition, which had resulted in a 10% reduction in RSA’s premium income in this line, to £291m for 2011.

“We just can’t get the prices and the rates we think we need to make money in that area and that is why we have been reducing volume,” said Brown.

One thing is for sure, RSA is willing to take action when it is faced with continuous low profitability in any area of its business.

It wants to be more targeted in motor and its personal lines portfolio is performing strongly. However, commercial is the real bugbear and the market will be watching closely to see what the company does next in commercial motor and the mid-market in general.