UK Insurer RSA Reports 15% Hike in 2020 Operating Profit

UK insurer RSA has reported a 2020 business operating result of £751 million ($1.1 billion), up 15% from £656 million ($926 million) reported during 2019.

The group paid out some £4.6 billion ($6.5 billion) in “normal” claims while also providing for over £250 million ($353 million) in COVID-19 specific claims, said RSA Chief Executive Stephen Hester.

On Jan. 15, 2021, the UK Supreme Court handed down a judgment relating to the Financial Conduct Authority’s test case on business interruption coverage wordings in the UK. As a result, RSA said, gross loss reserving for 2020 increased, but the company does not currently expect the net loss estimates to change materially.

RSA said COVID-19 caused an overal underwriting loss of an estimated £25 million ($35.3 million). In aggregate, the estimated net impact of COVID-19 from premiums, claims and investment income effects is a £42 million ($59.3 million) drag on the business operating result

RSA noted that during 2020, non-COVID-19 claims frequency was down versus the previous year in a range of 9%-34%, which provided a partial mitigation to the negative impacts of COVID-19 claims, investment income reductions and lower premiums.

Group reported a 2020 combined ratio of 91.1%, an improvement from 93.6% in 2019. (A combined ratio below 100% indicates an underwriting profit.)

The all-cash £7.2 billion ($10.2 billion) takeover bid for RSA by Canada’s Intact Financial in consortium with Denmark’s Tryg is likely to complete during Q2 2021, said the company. Hester, who became CEO in 2014, plans to step down after the acquisition.

Other highlights from RSA’s 2020 financial results include:

• Weather losses amounted to £140 million ($197.6 million) or 2.3% of net earned premiums in 2020, which is a little better than 2019. (In 2019, losses were 2.5% of net earned premiums, while the five year average is 2.8%).
• Large losses were £615 million ($868 million) or 9.9% of net earned premiums. (Large losses are defined by RSA as a single claim or all claims arising from a single loss event with a net cost of £500,000 or higher).
• Net written premiums of £6.2 billion ($8.8 billion) were down 3% from 2019 when net written premiums were £6.4 billion ($9 billion).
• Investment income of £258 million ($364 million) was down nearly 16% from £306 million ($432 million) in 2019.
• Solvency II coverage ratio was 189% at year-end 2020, compared to 178% at year-end 2019.