RSA under the weather

RSA Insurance Group claimed a solid performance in a challenging environment in the first half of 2012, even though profits fell by more than a third.

Profit before tax declined 38% to £233m in the six months to the end of June from £376m in the first half of 2011.

Net written premiums edged up 2% to £4,276m from £4,188m the year before. That represents a slow-down from the first quarter, when net written premiums were up 5% to £2.2bn.

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"Premium growth in the first half of the year was led by our focus areas of Emerging Markets, Canada and Speciality. In the UK, we've grown our core lines of Home, Pet and Commercial Property and continued to reduce volumes in Motor," Simon Lee, the insurance group's Chief Executive revealed.

The underwriting result was less good this time round, making a positive contribution of £158m as against £206m the year before. The combined operating ratio (COR), which measures how well the company has underwritten risk (a lower number is better), deteriorated by a couple of percentage points to 95.2%.

Following adverse weather in the first half of the year, RSA reiterated it now expects to deliver a COR of better than 96%. Investment income, which totalled £267m at the half-way point of the year, is still expected to be around £500m over the full year.

"In terms of profitability, our major overseas operations have again performed strongly with a COR of around 83% in Scandinavia and a record first half underwriting result in Canada. Set against this, are the adverse weather conditions experienced in the UK and the impact of the two Italian earthquakes in May. However, the overall COR of 95.2% represents a solid performance in challenging conditions," Lee claimed.

The regulatory capital position of the group under the Insurance Groups Directive (IGD) eased a little, with the IGD surplus slipping to £1.2bn from £1.3bn at the end of 2011, but was still 1.9 times the IGD requirement. "A 30% fall in the FTSE from the 30th June level of around 5,570 would reduce the IGD surplus by an estimated £0.2bn," the group revealed.

The interim dividend has been nudged up a couple of per cent from 3.34p to 3.41p.

JH