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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Rsa Insurance Group Ld | LSE:RSA | London | Ordinary Share | GB00BKKMKR23 | ORD GBP1.00 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 684.20 | 684.20 | 684.40 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMRSA
RSA Insurance Group plc
Q1 2015 Interim Management Statement
7 May 2015
2015 has started positively at RSA.Core Group premium income (NWP) is up 1% vsQ1 20141.Profit is again boosted by disposal gains, with underlying trends also improved on 2014 and in line with our expectations.
Restructuring action continues to move our Company forward, aimed at securing strategic focus, capital strength and sustainably higher performance levels.
Stephen Hester, RSA Group Chief Executive, commented:
"RSA made encouraging progress in Q1. Premium income returned to modest growth. Costs are falling as planned. Disposals were completed in Asia and others were contracted in India and for UK Engineering Inspection.
"Operating profit and underwriting performance were up on Q1 2014 though variable across different parts of the Group as can be expected in any single quarter. In particular our UK business results are gaining strength.
"Our near-term ambition is to have substantially completed the strategic focus and capital elements of our restructuring plan as we go into next year; to deliver improved underlying results in 2015 and to be making good progress towards our medium term performance targets.
"Lower interest rates and currency moves in our key territories continue to have adverse impacts, whilst insurance markets remain competitive. The path to high quality outperformance will not be smooth or easy, but our focus on that goal is clear."
Strategic update
Hot Features
Premium
-- Continued good progress on our Action Plan to secure strategic focus,
capital strength, and sustainably improved business performance.
-- Completed disposals of Singapore and Hong Kong (gain on sale GBP109m);
announced disposals of minority interest in India and our UK
Engineering Inspection business.
-- On plan for Solvency II internal model submission in Q2. Capital
ratios at Q1 are slightly up versus year end, in line with our
expectations.
-- Costs and headcount are falling as expected. Remediation in Ireland
continues.
Trading update
-- Core Group net written premiums of GBP1.5bn, up 1%1 (up 5% ex
new Group reinsurance programme). Underlying trends in line with
expectations across all regions.
-- Underwriting result seasonally subdued but largely as planned, with
some variability by region.
-- Investment performance is on track to deliver around GBP380m of income
in 2015.
-- Q1 net attributable profits a little ahead of our plans and included
anticipated disposal gains.
-- Tangible equity GBP3.0bn (31 December 2014: GBP2.9bn).
-- Capital metrics at 31 March 2014: IGD surplus c.GBP1.9bn with coverage
of 2.3 times; Economic capital surplus c.GBP0.9bn with coverage of 1.3
times.
1 at constant exchange rates
Q1 2015 trading update
Market conditions
Insurance markets continue to be competitive but navigable. Pricing has held up well in Scandinavia where conditions remain relatively stable. In Canada, conditions are mixed with market hardening in personal household offset by weaker conditions elsewhere. In the UK, pricing conditions remain soft across all major lines.
Foreign exchange movements continue to impact reported results. Sterling is stronger against all of our major currency exposures than a year ago, with further strengthening versus Scandinavia and Canada in particular during the first quarter (8% strengthening against the Danish Krone, 5% against the Swedish Krona, and 4% against the Canadian Dollar).
Interest rates have again trended lower across our major markets further impacting the reinvestment rate on our bond portfolio (5 year government bond yields in Sweden and Denmark were down c.10 and c.30 basis points respectively in the first quarter of the year, and Canadian yields were down c.50 basis points). Most of this movement occurred in January and was therefore factored into the investment income guidance we provided at the end of February.
Profitability
At a headline level net attributable profits are tracking a little ahead of our plan. The first quarter is seasonally weak for underwriting performance. Q1 2015 trends are consistent with the improvements we are targeting versus 2014, however results show some variability by region as can be expected in any single quarter. Our UK business results are gaining strength. Remediation in Ireland is ongoing.
Investment performance remains on track to deliver around GBP380m of income in 2015.
We have continued to reduce expenses and are making good progress against the increased targets we set out earlier this year.
First quarter profit included GBP109m disposal gains from the sales of Hong Kong and Singapore.
Underlying current year loss ratio: The underlying loss ratio for Q1 2015 was better than Q1 2014 driven by the UK, Canada and Latin America, with Scandinavia marginally weaker. The underlying loss ratio was slightly behind our plan overall, with the UK and Latin America better than plan, and Scandinavia and Canada behind plan.
Weather losses: As at the end of Q1 we have booked total weather costs for the year-to-date of GBP48m which represents 2.6% of net earned premiums (Q1 2014: 5.7%). Weather was relatively benign in the UK, Ireland and Scandinavia. In Canada, adverse winter weather has resulted in elevated weather costs (albeit lower than Q1 2014), whilst in Latin America, severe flooding in the north of Chile in March resulted in an estimated net cost of c.GBP14m.
Large losses: Large losses for the year-to-date of GBP138m represent 7.5% of net earned premiums (Q1 2014: 5.4%), slightly worse than expected.
Prior year: Prior year reserve emergence for the first quarter was in line with our expectations overall, although with variability by region. We continue to expect prior year profits to be generally below 1% of premiums but potentially variable given our commitment to transparent reserve margins.
We target continuing improvements to underwriting profitability in the remainder of the year, though very much subject to weather/large loss volatility and prior year reserve movements.
Net written premiums
3 Months 3 Months Change Change atconstant
2015 20141 asreported fx
GBPm GBPm % %
Scandinavia
Household 88 94 (6) 6
Personal Motor 103 118 (13) 1
Personal 81 91 (11) 4
Accident
& Other
Total Personal 272 303 (10) 3
Property 125 132 (5) 9
Liability 78 75 4 16
Commercial 70 80 (13) -
Motor
Marine & Other 66 71 (7) 6
Total 339 358 (5) 8
Commercial
Total 611 661 (8) 6
Scandinavia
Canada
Household 62 58 7 11
Personal Motor 112 121 (7) (5)
Total Personal 174 179 (3) -
Property 8 15 (47) (47)
Liability 10 12 (17) (17)
Commercial 19 19 - 6
Motor
Marine & Other 3 5 (40) (40)
Total 40 51 (22) (20)
Commercial
Total Canada 214 230 (7) (4)
UK
Household 119 128 (7) (7)
Personal Motor 57 50 14 14
Pet 71 66 8 8
Total Personal 247 244 1 1
Property 129 121 7 10
Liability 60 67 (10) (8)
Commercial 46 36 28 28
Motor
Marine 88 72 22 22
Total 323 296 9 11
Commercial
Total Core UK 570 540 6 7
Ireland
Personal 34 42 (19) (11)
Commercial 18 18 - 6
Total Ireland 52 60 (13) (5)
Latin America
Chile 23 11 109 130
Mexico 18 17 6 13
Brazil 22 26 (15) (4)
Argentina 53 52 2 6
Colombia 4 13 (69) (64)
Uruguay 11 9 22 22
Total Latin 131 128 2 10
America
Total Core 1,578 1,619 (3) 5
Group
(before
Group Re)
Group Re2 (103) (46) (124) (124)
Total Core 1,475 1,573 (6) 1
Group
Discontinued 116 155 (25) (22)
& non-core
Total Group 1,591 1,728 (8) (1)
1 Q1 2014 net premiums restated for changes to reinsurance accounting - please refer to page 11 for further details
2 Group Re premiums include GBP139m in Q1 2015 for the purchase of a new 3 year Group aggregate reinsurance cover, and GBP67m in Q1 2014 for the purchase of the Group Adverse Development Cover.
Core Group net written premiums in the first quarter were up 1% at constant exchange rates, and up 5% excluding the impact of Group Re.
Scandi-navia Canada UK Ireland LatinAmerica Total
Net Written 611 214 570 52 131
Premiums
(GBPm)
% changes
in NWP
Volume change 3 (6) 5 (10) 6 2
including
portfolio
actions
Rate increases 3 2 2 5 4 3
Core Group Q1 6 (4) 7 (5) 10 5
2015 CFX
movt. (ex Group
Re)
Impact of Group (4)
Re1
Core Group 1
Q1 2015
CFX movt.
Impact (2)
of
non-core
businesses/disposals
Total Group Q1 (1)
2015 CFX movt.
1 Group Re premiums include GBP139m in Q1 2015 for the purchase of a new 3 year Group aggregate reinsurance cover, and GBP67m in Q1 2014 for the purchase of the Group Adverse Development Cover.
Scandinavian net written premiums were up 6% at constant exchange to GBP611m. Excluding the impact of two large commercial deals, growth was 2%. Personal grew 3% with strong growth of 5% in Sweden Personal driven by Household and Personal Accident due to a combination of rate increases and good retention levels. Denmark Personal premiums were up 3% with growth across all lines, whilst Norway Personal premiums were down 3% primarily as a result of the termination of a single large affinity arrangement in late 2014.
Commercial premiums were up 8% with growth of 12% in Denmark Commercial driven by strong progress in Renewable Energy and Workers Compensation, with two large deals in particular secured during the first quarter. Sweden Commercial grew 4% with good new business levels in the Care portfolio, whilst Norway Commercial premiums were flat.
In Canada, net written premiums were down 4% at constant exchange to GBP214m. Personal premiums were flat, with a 5% reduction in Motor offset by growth of 11% in Household. Household premiums included continued rate action whilst lower Motor premiums were primarily driven by the government mandated rate reductions in Ontario. In Commercial, premiums were down 20% during the first quarter, largely expected as our 2014 portfolio actions roll through the book. Despite this we anticipate that Canada will show overall growth for the full year 2015.
UK & Ireland. In the UK, headline growth was flattered by the benefit of lower reinsurance costs and the changes to our reinsurance programme set out in February, together with a number of one-off items. Excluding these items, net written premiums were up 3%.
In UK Personal, net written premiums were up 1%. Household premiums fell 7% reflecting competitive conditions and lower retention. In Motor, growth of 14% was mainly driven by a strong performance in our telematics offering. We have continued to maintain pricing discipline with year-to-date average rate increases on renewed motor business of 1%. Pet growth of 8% was driven by continued rate increases to cover rising claims inflation.
In UK Commercial, we have continued to maintain underwriting discipline despite significant price competition across the market. Excluding reinsurance changes and one-off items, net written premiums were up 3%. Property growth mainly reflected lower reinsurance premiums, partly offset by the impact of targeted exits. Motor growth was driven by good retention and targeted new business in our Fleet portfolio, and Motability changes as the portfolio balance shifts to the new contract. Marine premiums benefited from good retention and lower reinsurance costs as well as the absence of the pipeline premium adjustments made in Q1 2014. Liability contraction reflected the ongoing impact of portfolio remediation offset by strong growth in our Regions Packages portfolio.
In Ireland, net written premiums of GBP52m were down 5% at constant exchange, and broadly in line with our expectations, reflecting the ongoing impact of our remediation work.
Latin America net written premiums of GBP131m were up 10% at constant exchange. The economic environment continues to be relatively muted with lower growth levels driven by falling commodity prices and weakening currencies. In Chile and Argentina, new large long-term distribution agreements drove better than expected growth. Mexico also benefited from new affinity deals. Lower premiums in Colombia and Brazil reflect the restructuring actions we took there in 2014.
Group Re premiums in Q1 2015 included GBP139m for the purchase of a group aggregate cover (for which full details were disclosed in February). The premium will be earned over the 3 year life of the contract. Q1 2014 Group Re premiums included GBP67m for the Group Adverse Development Cover.
Investment portfolio
Value Foreignexchange Mark tomarket Othermovt. Transfer Value
31 Dec2014 toassets 31 Mar 2015
heldfor sale
GBPm GBPm GBPm GBPm GBPm GBPm
Government 4,163 (138) 51 80 - 4,156
bonds
Non-Government 8,085 (243) 68 (7) - 7,903
bonds
Cash 1,011 (20) - 104 - 1,095
Equities 160 (10) 21 (12) - 159
Property 346 - 10 - - 356
Prefs & 335 (7) (13) 31 - 346
CIVs
Other 97 (4) (1) 4 - 96
Total 14,197 (422) 136 200 - 14,111
Split
by
currency:
Sterling 4,466 4,559
Danish 1,229 1,105
Krone
Swedish 2,344 2,272
Krona
Canadian 3,128 2,965
Dollar
Euro 1,308 1,271
Other 1,722 1,939
Total 14,197 14,111
The investment portfolio fell by GBP0.1bn in the first quarter to GBP14.1bn with adverse foreign exchange movements partly offset by net cash inflows and positive mark-to-market movements.
At 31 March 2015, high quality widely diversified fixed income securities represented 85% of the portfolio (31 December 2014: 86%). Equities represented 1% (31 December 2014: 1%) and cash 8% of the total portfolio (31 December 2014: 7%).
The quality of the bond portfolio remains very high with 98% investment grade and 65% rated AA or above. We remain well diversified by sector and geography.
The average book yield on the total portfolio was 3.0% (2014: 3.1%), with average yield on the bond portfolios of 2.7% (2014: 3.0%). Reinvestment rates in the Group's bond portfolios at 31 March 2015 were approximately 130bps lower than the existing average book yield.
Average bond duration is 4.2 years (31 December 2014: 4.0 years) largely reflecting investment of strong net cash flows into the UK portfolio. We do not currently anticipate any further material increases in average duration from the current level.
Balance sheet unrealised gains of GBP782m (pre-tax) increased by GBP110m during the first quarter (31 December 2014: GBP672m) driven by lower bond yields, particularly in Scandinavia and Canada.
Investment performance remains on track to deliver around GBP380m of income in 2015.
Shareholders' funds
Shareholders'funds TNAV
31 Mar 2015 GBPm 3,868 2,981
pence/share 369 294
31 Dec 2014 GBPm 3,825 2,900
pence/share 365 286
Tangible net asset value increased by GBP81m (3%) in the quarter. The movement was mainly driven by profits (including disposal gains) and fair value gains, partly offset by adverse foreign exchange and pension fund movements.
Tangible net asset value per share increased by 8 pence to 294p.
Capital position
Requirement Surplus Coverage
GBPbn GBPbn (times)
InsuranceGroupsDirective1 31 Mar 2015 1.4 1.9 2.3
31 Dec 2014 1.4 1.8 2.2
EconomicCapital1 31 Mar 2015 3.5 0.9 1.3
(S&P 'A' curve)
31 Dec 2014 3.4 0.9 1.3
1 The IGD and economic capital positions at 31 March 2015 are estimated.
At 31 March 2015, the IGD surplus was GBP1.9bn covering the capital requirement 2.3 times. The surplus increased by GBP0.1bn in the quarter driven by capital generated, including the sales of Hong Kong and Singapore.
The estimated economic capital surplus at 31 March 2015 was GBP0.9bn giving coverage over the capital requirement of 1.3 times. Capital generated in the quarter fully absorbed adverse foreign exchange and yield movements together with pension contributions which are paid during the first quarter.
Across the full range of regulatory and rating agency measures we manage to, Q1 2015 ratios are improved modestly versus year end reporting.
Supplementary information
Net earned premiums
3 Months 3 Months20141 Change Change atconstant
2015 asreported fx
GBPm GBPm % %
Scandinavia
Household 70 77 (9) 4
Personal Motor 80 92 (13) 1
Personal 68 76 (11) 5
Accident
& Other
Total Personal 218 245 (11) 3
Property 69 85 (19) (7)
Liability 33 33 - 10
Commercial 45 52 (13) -
Motor
Marine & Other 30 33 (9) 3
Total 177 203 (13) (1)
Commercial
Total 395 448 (12) 2
Scandinavia
Canada
Household 111 110 1 4
Personal Motor 145 157 (8) (5)
Total Personal 256 267 (4) (1)
Property 48 54 (11) (9)
Liability 27 31 (13) (10)
Commercial 21 23 (9) (5)
Motor
Marine & Other 12 13 (8) (8)
Total 108 121 (11) (8)
Commercial
Total Canada 364 388 (6) (3)
UK
Household 159 163 (2) (2)
Personal Motor 68 87 (22) (22)
Pet 65 61 7 7
Total Personal 292 311 (6) (6)
Property 150 148 1 3
Liability 71 75 (5) (5)
Commercial 102 130 (22) (22)
Motor
Marine 75 55 36 36
Total 398 408 (2) (2)
Commercial
Total Core UK 690 719 (4) (4)
Ireland
Personal 43 56 (23) (16)
Commercial 25 29 (14) (4)
Total Ireland 68 85 (20) (12)
Latin America
Chile 46 43 7 12
Mexico 22 23 (4) -
Brazil 27 31 (13) (4)
Argentina 58 49 18 23
Colombia 11 21 (48) (39)
Uruguay 12 11 9 9
Total Latin 176 178 (1) 5
America
Total Core 1,693 1,818 (7) (2)
Group
(before
Group Re)
Group Re 3 6 (50) (50)
Total Core 1,696 1,824 (7) (2)
Group
Discontinued 126 186 (32) (30)
& non-core
Total Group 1,822 2,010 (9) (5)
1 Q1 2014 net premiums restated for changes to reinsurance accounting - please refer to page 11 for further details
Rate changes
YTD Rate Increases1(%) At Mar 2015 At Dec At September2014 At June
2014 2014
% % % %
Scandinavia
Personal Household 3 4 4 4
Personal Motor 3 3 3 2
Commercial Property 2 2 4 5
Commercial Liability 4 4 4 4
Commercial Motor 3 4 4 4
Canada
Personal Household 9 10 10 9
Personal Motor (4) (2) (1) (1)
Commercial Property 4 5 4 4
Commercial Liability 3 3 3 3
Commercial Motor 2 1 2 1
UK
Personal Household 1 (1) - -
Personal Motor 1 2 3 3
Commercial Property 1 2 3 3
Commercial Liability 1 4 5 5
Commercial Motor 2 2 3 3
1 Rating changes reflect rate movements achieved for risks renewing in the year-to-date versus comparable risks renewing in the same period the previous year.
Foreign exchange rates
Foreign exchange rates used in this statement are:
Average rate Closing rate
3 Months 3 Months 31 Mar 31 Dec
2015 2014 2015 2014
Canadian Dollar 1.88 1.83 1.88 1.81
Danish Krone 10.03 9.02 10.33 9.60
Swedish Krona 12.63 10.71 12.85 12.22
Euro 1.35 1.21 1.38 1.29
Argentinean Peso 13.14 12.62 13.09 13.27
Chilean Peso 944.83 912.51 925.47 946.85
Bond yields
Five year government bond yields (source: Bloomberg):
% 31 Dec 31 Dec 31 Mar
2013 2014 2015
UK 1.9 1.2 1.2
Denmark 1.2 0.1 -0.2
Sweden 1.8 0.1 0.0
Canada 1.9 1.3 0.8
Reinsurance accounting restatement
We have changed our accounting for excess of loss reinsurance policies purchased by the Group. Reinsurance written premiums are now recognised in full on inception. Previously, reinsurance written premiums were recognised when earned.
The treatment has been changed from 1 January 2015 and has no impact on the insurance result, combined ratio or net assets. Q1 2014 has been restated to ensure comparatives are on a consistent basis. Similar restatement will be required at Q2 and Q3. The restatements for Q1, Q2 and Q3 2014 are to decrease net written premiums by GBP256m, GBP161m and GBP85m respectively.
Hong Kong & Singapore disposals
On 1 April at 00:01 (Singapore time) the sale of the Hong Kong and Singapore insurance businesses was completed. The timing was equivalent to 31 March for the UK and therefore the impact of the transaction was reflected in the Q1 results and net assets.
The final gain on disposal of these businesses will be based on the completion accounts as at 31 March based on local GAAP. These accounts are due for completion 60 working days after 31 March. However, based on 31 March Group IFRS reporting the gain has been estimated at GBP109m.
Changes to Interim Management Statement requirements
In November 2013 the EU published the Transparency Directive Amending Directive. One of the provisions was the removal of the requirement for companies admitted to trading on a regulated market to publish Interim Management Statements (IMS). Member states had two years in which to implement the directive. Accordingly, in November 2014 the FCA removed the requirement within the Disclosure and Transparency Rules to publish an IMS.
RSA will continue to publish Interim Management Statements on a voluntary basis until further notice.
Enquiries:
Investors & analysts Press
Rupert Taylor Rea Louise Shield
Head of Investor Relations Director of External
Communications
Tel: +44 (0) 20 7111 7140 Tel: +44 (0) 20 7111 7047
Email: Email:
rupert.taylorrea@gcc.rsagroup.com louise.shield@gcc.rsagroup.com
Ryan Jones Kaidee Sibborn
Investor Relations Manager Media Relations Manager
Tel: +44 (0) 20 7111 7243 Tel: +44 (0) 20 7111 7137
Email: ryan.jones@gcc.rsagroup.com Email:
kaidee.sibborn@gcc.rsagroup.com
Conference call for analysts and investors
A conference call for analysts and investors will be held at 8:30am on Thursday 7 May to discuss the Q1 Interim Management Statement. Participants should call +44 (0)808 237 0036 (toll free) or +44 (0)20 3427 0662, using conference title: RSA Q1 2015 IMS. A recording of the call will be available via the company website (www.rsagroup.com).
Important disclaimer
This press release and the associated conference call may contain 'forward-looking statements' with respect to certain of the Group's plans and its cxurrent goals and expectations relating to its future financial condition, performance, results, strategic initiatives and objectives. Generally, words such as "may", "could", "will", "expect", "intend", "estimate", "anticipate", "aim", "outlook", "believe", "plan", "seek", "continue" or similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performance. By their nature, all forward-looking statements are inherently predictive and speculative and involve risk and uncertainty because they relate to future events and circumstances which are beyond the Group's control, including amongst other things, UK domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation or regulations in the jurisdictions in which the Group and its affiliates operate. As a result, the Group's actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in the Group's
forward-looking statements. Forward-looking statements in this press release are current only as of the date on which such statements are made. The Group undertakes no obligation to update any forward-looking statements, save in respect of any requirement under applicable law or regulation. Nothing in this press release shall be construed as a profit forecast.
This information is provided by Business Wire
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