While 2016 was a strong year for RSA on a group basis, its Irish business showed an underwriting loss of £49m (€58m), up from £35m, and a jump from £26m to £42m in operating losses.
RSA said the headline underwriting loss in Ireland was “disappointing” but the current year underwriting result has returned to profit with a £30m year-on-year improvement.
Last year’s Irish losses stemmed from the setting aside of £50m of reserves to cover accident costs in its commercial and motor portfolios and higher-than-expected claims levels in 2014 and 2015.
RSA yesterday said that its performance improvement plan continues in Ireland and that it is targeting a return to operating profitability in 2017 “through continued underwriting improvement, portfolio remediation and cost reduction”.
However, it has also warned that its motor, liability and SME portfolios are likely to see further price increases this year and that RSA Ireland may face “additional reserve volatility” due to the “challenging market environment” for claims inflation and legislation revision.
Across the board, motor premiums alone have jumped by nearly 60% in the past three years, with an increase in the number of cars on Irish roads.
RSA had to pump £200m (€237m) into its Irish business as an accounting scandal showed it had not set aside enough reserves to cover large claims.
Earlier this week, the UK’s accounting watchdog, the Financial Reporting Council, announced combined fines of over £200,000 for three former RSA Ireland workers, with two being banned from operating for three years, over the bookkeeping scandal uncovered in 2013.
RSA Ireland’s full-year premiums rose by 6% last year to £306m.
Commercial premiums rose 12% to £121m, and net written personal premiums rose 2% to £185m. Its combined operating ratio — which indicates a profitable business when below 100% —grew from 113.4% to 116.2%. On a group-wide basis, RSA’s combined operating ratio strengthened from 96.9% to 94.2% last year.
RSA shares jumped to a more than five-year high yesterday — up by over 6.4% in London — as the insurer posted a 25% rise in 2016 group operating profit, beating forecasts thanks to strong performances in most of its core businesses. Operating profit for the year came in at £655m, compared with a company-supplied consensus forecast of £626m.
RSA has been undergoing a restructuring programme under Stephen Hester, the former head of RBS. A plan in 2015 by Zurich Insurance to buy RSA for £5.6bn fell through due to problems in Zurich’s business and Mr Hester said the insurer was better off alone.
“Our shareholders are benefiting significantly from not having sold to Zurich,” Mr Hester said yesterday, adding there were no bids on the table for RSA, and that the firm “does not need a deal”.
Mr Hester joined RSA in 2014 in a shake-up following the accounting scandal in the Irish division.
The insurer said it would pay a final dividend of 11p per share and total dividend of 16p, up 52% from a year earlier and above a forecast 15.1p.
It also upgraded its cost-reduction target to more than £400m of gross annualised savings by 2018.