NEWS: 2015 Interim Results announced - RSA Group plc - Excellent progress implementing the RSA Action Plan
- Operating profit £259m (up 84%). Pre-tax profit £288m (up 317%)
- Loss ratio, costs, combined ratio and capital ratios all improving
Stephen Hester, RSA Group Chief Executive, commented: "We are making fundamental improvements to RSA, as promised. These interim results show excellent progress on all key measures. The foundations are being laid to improve still further. “Profits are up strongly on both a headline and underlying basis. Premium income has been stabilised, underwriting and cost levers are responding positively. The interim dividend is restored and progress continues on strategic reshaping and capital strength. “We are encouraged by the momentum at this stage of our planned improvements."
Read further comment from Stephen Hester
Trading results - Core Group premiums up 2%1 ex Group reinsurance programme. Overall Group net written premiums of £3.4bn down 3%1 year-on-year post disposals.
- Group operating profit £259m (H1 2014: £141m): UK £144m; Canada £92m; Scandinavia £55m.
- Group underwriting profit of £101m (H1 2014: £23m loss). Core Group combined ratio of 96.9% (H1 2014: 100.3%). Record underwriting profits in the UK and Canada (Combined ratios of 94.4% and 92.3% respectively). Underlying results in Scandinavia strong.
- Current year underwriting profit of £73m (H1 2014: £27m); current year attritional loss ratio of 57.1%, 1.2pts better than prior year (H1 2014: 58.3%). Weather and large losses £7m better than planned and £36m2 better than H1 2014.
- Prior year underwriting profit of £28m, within our expected range of 0-1% of net earned premiums. Positive development in Canada and the UK; net strengthening in Scandinavia.
- Ireland underwriting loss of £16m, much reduced from H1 2014 (£65m loss) - remediation continues. Improved underwriting result in Latin America despite impact of first quarter Chile floods.
- Investment income of £206m; full year outlook improved to c.£390m. Increasing bond yields during H1 are a positive for future earnings and economic capital ratios.
- Net gains of £169m include £140m from disposals completed in the first half. Reorganisation costs were £55m. No further ‘clean up’ charges in the period.
- Pre-tax profit was £288m (H1 2014: £69m). Post tax profit of £215m (H1 2014: £6m).
- Capital metrics at 30 June 2015: ECA surplus c.£1.0bn (up from £0.9bn at FY 2014) with coverage of 1.3 times; IGD surplus c.£1.7bn with coverage of 2.2 times.
- UK pension schemes at 30 June 2015 showed a £106m IAS19 surplus. At 31 March 2015 the funding level was estimated to be 97% (prior to any assumption changes or update of scheme data in the triennial review process).
- Tangible equity £2.9bn (31 December 2014: £2.9bn), 282p per share. Tangible equity to premiums ratio of 42%3 (31 December 2014: 39%).
- Reserve margin for the core Group increased to 5.2% of booked reserves.
- Underlying return on tangible equity of 9.7% (H1 2014: 6.4%).
- Interim dividend payment reinstated with a declaration of 3.5p per ordinary share.
Strategic update - The intense pace of change over the last 18 months to make RSA better, stronger and more focused is now producing strong results. This is building further confidence and ambition within our business.
- The disposal programme, that has reshaped RSA and funded the clean-up, continues to deliver. In the first half we completed the disposals of Hong Kong, Singapore and China, and announced disposals of our UK Engineering Inspection business and our Indian associate. These bring total agreed disposal proceeds to date of £835m, with gains of c.£500m to date.
- Improvements in capital and balance sheet health continue. S&P ‘A’ rating reaffirmed. No additional ‘clean up’ charges needed in the period.
- Performance improvement actions progressing well with focus on improving our customer franchise, improving underwriting loss ratios and reducing costs.
- Cost reduction ahead of plans. Increased confidence in delivery of cost reduction target of greater than £250m by 2017.
- Total Group controllable costs were down 10% H1 2015 vs. H1 2014 at constant exchange to £932m. Core business controllable costs were down 3% in the same period at constant exchange to £854m (comprising 5% cost reductions, offset by 2% inflation).
- Group FTE down 19% since start of 2014 (8% down ex disposals).
- Our focus is to continue the excellent work we have done over the last 18 months, with further strong progress on underlying loss ratios and expense control to drive sustainably higher underwriting profits subject to weather, large losses and prior year reserving.
- We remain confident in meeting our medium term performance targets: underlying return on tangible equity of 12-15% by 2017; tangible equity expected to be 35-45%4 of net written premiums; ordinary dividend payout ratio of 40-50% with additional payouts where justified.
- We will manage the business with the intention of moving towards first quartile performance in our markets and of outperforming our performance targets where possible.
Notes 1 At constant FX. 2 Net of earned premium for Group aggregate reinsurance cover; H1 2014 comparative adjusted for actual 2015 volume. 3 30 June 2015 TNAV:NWP ratio calculated using two times H1 2015 NWP. 4 Capital target to be updated at end 2015 once Solvency II impacts are assessed. Note: On an IFRS basis, pre-tax profit of £288m comprises profits from both continuing and discontinued operations.
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Live webcast and conference call detailsA live webcast of the presentation to analysts and investors, including a question and answer session, will be broadcast on the website at 10.300am today (6 August 2015). A film and transcript of the presentation will be made available on the Investor Relations section of www.rsagroup.com around midday on 6 August 2015.
Contacts for more information Important disclaimerNOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION This press release and the associated conference call may contain ‘forward-looking statements’ with respect to certain of the Group’s plans and its current 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.
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