Disappointing 2013 headline results with pre-tax loss of £244m but normalised [2] pre-tax profit of £427m
- Net written premiums up 3% on constant exchange rate basis to £8.7bn
- Weather charge of 3.5% of premiums; significantly higher than five year average
- Irish underwriting loss of £220m from management irregularities, reserve strengthening and Q4 adverse weather
- Group underwriting profit of £57m (2012[1]: £358m); normalised [2] underwriting result of £309m
- Investment income of £493m (2012: £515m)
- Goodwill and software intangibles write downs of £331m
- IGD surplus at 31/12/13 of £0.2bn, ECA surplus of £0.7bn; Adjusting for impact of proposed rights issue, IGD surplus at 27/02/14 expected to be c.£1.3bn with coverage of 1.8 times
Strategic action plan including £775m rights issue
- UK & Ireland, Canada, Scandinavia and Latin America to form core of the Group going forward
- Extensive business improvement plans in train focused on portfolio actions and expense efficiency
- Certain disposal processes have already commenced targeting c.£300m proceeds in 2014
- Capital actions to reduce equity and property exposure and execute new reinsurance structures complete
- Independent review of reserves complete. Conclusion that reserves are in a reasonable range
- Our own assessment of margin in reserves at 31/12/13 is 5.0%
- Proposed rights issue to be launched with the aim of raising £775m
- Impact of 2013 results means final dividend cannot be justified
Stephen Hester, Group Chief Executive of RSA, commented:
“We believe that RSA can be a strongly performing company within our industry. Today we are announcing determined action plans designed to achieve that goal. Our core businesses, our 19m customers and our dedicated staff provide key assets to base this work upon.
“RSA’s 2013 results are poor and we need to grasp the nettles of both underperformance and undercapitalisation. As part of this we intend to launch a rights issue to help ensure we have the appropriate level of capital behind the Group. Together with a series of significant ‘self-help’ measures, we believe this will put the Group’s capital in the right place for the future. It will give us the necessary platform to focus aggressively on tightening strategy, improving customer service in core businesses and delivering operational improvements; and from these actions deliver attractive returns on a stronger tangible equity base.
“Serve customers well. Operate with capital strength. Focus on driving shareholder value. This is our agenda.”
[1] 2012 figures throughout this document, where impacted, have been restated for changes to IAS 19 'Employee Benefits'.
[2] 2013 normalised reflects adjustments for above trend weather losses, financial impact of issues in Ireland, discount rate changes in the UK and reorganisation costs