(Alliance News) - RSA Insurance Group PLC on Thursday said its business operating profit was higher in the first nine months of the year, though noted a dip in net written premiums.
The London-headquartered general insurer said business operating profit for the nine months ended September was higher with, as guided, "a significantly improved combined ratio and lower investment income".
This was despite fully reserving for the UK business interruption court case in September, in which the UK High Court sided with policyholders, requiring UK insurers to pay out on most Covid-19-related business interruption claims.
Excluding Covid-19 impacts, all three of its regions performed on or ahead of RSA's plans.
The firm began the second phase of its UK cost programmes during the third quarter and booked GBP14 million of charges below the operating result as a consequence.
It noted that: "In September we increased claims reserves by GBP62 million net of reinsurance in respect of the judgment from the FCA test case published on the 15 September 2020 and allowing for the latest position on the group volatility cover. The majority of this has been booked as large losses (c.75%) with the remainder booked within the attritional loss ratio.
"RSA and the other parties to this case have filed an appeal to the judgment to the Supreme Court under a 'leapfrog' appeal process, the results of which are expected later this year. Our estimate of the gross impact of the initial ruling which we published on 15 September has been revised down by c.GBP20 million which reduces the likely claims on reinsurers but has little impact on the net cost absorbed by RSA as outlined above. To date there has been no material increase in claims activity related to Covid-19 'second wave' in our various territories."
Investment income was within RSA's 2020 guidance range and its exit portfolios generated a modest GBP6 million of further loss in the quarter.
Net written premiums totalled GBP5.66 billion, a 35 drop versus year-to-date 2019, though was flat excluding estimated Covid-19 impacts.
As at September 30, tangible shareholders' equity was GP3.35 billion, having been GBP2.91 billion at the end of 2019. Tangible net asset value per share was 323 pence at September end, up from 282p.
Chief Executive Stephen Hester said: "RSA's run of record underwriting results is continuing. The group recorded a Q3 discrete combined ratio of 90%, despite providing fully for the UK BI Court ruling in September. While Covid-19 has held back our profit overall, RSA's inherent strength and the improvements we have made are driving the business forward in a pleasing manner. The outlook for continued underwriting improvements remains positive."
Shares in RSA were down 2.0% at 450.70 pence in London on Thursday morning.
By Anna Farley; annafarley@alliancenews.com
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