A strong underwriting performance and steady premium growth was behind a 12% increase in RSA’s pre-tax profits, which rose to £620 million in 2017.
The group also announced a 23% improvement on the final dividend compared to the year before, and their shares rose by 3.1% in early trading following the news.
RSA Insurance said that their record level of profitability was down to strong performances in Scandinavia and Canada offsetting poorer results in the UK due to some large losses, adverse weather events and an increase in home insurance claims.
The UK-based insurance company has been undergoing a bout of restructuring under chief executive Stephen Hester, and the results are starting to bear fruit. The company said that its combined ratio (a measure of underwriting quality regarding the ratio between the costs of claims compared with premiums) improved to 94% in 2017 – a new record for the company.
Together higher premiums and improved CORs drove a 4% increase in underwriting profits to £394m. Investment income fell 10% to £331m, reflecting disposals and reinvestment at lower yields.
Costs continue to fall, down 6% year-on-year, with headcount now 23% lower than at the beginning of 2014. Savings targets have been raised for the fourth time to £450m by 2019 (of which £395m has been achieved to date).
Balance sheet restructuring saw interest expense half in the year, as the group retired higher interest debt through the issue of new bonds.
RSA’s Solvency II position, an important measure of insurers’ capitalisation, improved slightly to 163%, with a surplus of £1.1bn. This is slightly above the groups target range of 130-160%.
Announcing the results, Mr Hester said:
In a tough period for insurance markets, we are delighted to produce another year of growing profits, dividends and return on equity for shareholders. Higher premium income also highlights the positive customer response to what we are offering.