Restructure sees RSA profits soar in 2015

The FTSE 100 company saw core group premiums rise 1%, though overall group net written premiums were down 3% year-on-year, with the group blaming its disposal programme for the drop.

Group operating profit rose grew 43.3% to £523m, from £365m. Its Scandinavian operations accounted for £163m of that, Canada £182m and the UK £175m.

RSA Group's underwriting profit soared 437% to £220m, from £41m. Core group combined ratio was 96%, down from 98.8%, with the company citing strong underlying results across the three regions,

The company said there was record underwriting profit in Canada, with a combined ratio of 91.7%.

Weather and large losses were £68m worse than planned, however, though it was £20m better than in 2014. The net cost of December's weather events was £76m.

Its post tax profit of £244m was up 221%, after one-off costs associated with the group's restructuring and turnaround.

Underlying earnings per share were up to 27.8p, from 16.8p, and headline earnings per share were 22.3p, up from 6.2p.

The board declard a final dividend of 7p per share, bringing total 2015 dividends to 10.5p.

“2015 was a year of major achievement for RSA. As a result, the turnaround phase of our Action Plan is largely complete and we have good prospects of substantial further performance improvement," said group chief executive Stephen Hester.

“RSA is now a strong and focused international insurer with leadership positions in the UK, Scandinavia and Canada. The group's strategic restructuring will complete in 2016 as remaining contracted disposals close. The power of increased simplicity and focus is already helping drive better performance. RSA is well placed for a bright long-term future," he added.

The operating loss at the company's Irish operation was much reduced during the year, at £26m, compared with a £97m loss in 2014. It expected the division to reach operating profit in 2016.

RSA earned investment income of £403m, down slightly from 2014's £439m. It also saw gains of £184m from disposals completed during the year, though reorganisation costs were £182m and included items related to RSA's increased cost saving target.

Its Solvency II coverage was over the solvency capital requirement (SCR) at 143%. A new SCR of 130%-160% had been established.

RSA's reserve margin was stable at 5% of booked reserve.

The group's tangible equity was slightly down at £2.8bn - from £2.9bn in 2014 - or 279p per share. Its tangible equity-to-premiums ratio was 42%, up from 39% a year ago.

"We are today increasing our annual gross cost savings target to over £350m by 2018 and raising our underlying return on tangible equity expectation to the upper half of our 12-15% target range by 2017 with further improvement to come thereafter," said Hester.

"We see 2016 as the last major restructuring year with disposals and balance sheet work completing and the heavy lifting of core business improvement and cost reduction action continuing. We expect challenging markets and to rely on self-help to progress. Despite these headwinds we face the future with determination and confidence," he added.

Looking ahead, the board wanted focus on strategic priorities to make RSA 'focused, stronger and better'. Its cost reduction programme was ahead of original targets, and it expected to achieve around £250m gross savings by 2016, a year ahead of schedule.

It upgraded its total cost savings programme target for a second time, to £350m by 2018.

RSA Group had a medium term performance target of 12%-15% underlying return on tangible equity remains, however it was aiming at the upper half of that in 2017. Its dividend policy remained unchanged, with a medium term ordinary payour of 40%-50% and special dividends where justified.