RSA sees underwriting profit rise, seeks to offload asbestos liabilitiesReprints
(Reuters) -- British insurer RSA Group P.L.C. is likely to show record underwriting profits for the first nine months of 2016 and is planning to sell or reinsure £1 billion ($1.23 billion) worth of legacy U.K. business, chief executive Stephen Hester said.
RSA is in the middle of a large-scale restructuring under the stewardship of former Royal Bank of Scotland boss Mr. Hester, which has included selling some overseas businesses and cutting costs.
“My guess is that it would be our best ever nine months of underwriting profits ... because of the very active self-improvement programs,” Mr. Hester told reporters in a conference call on Thursday after the insurer reported a 5% drop in net written premiums to £4.82 billion ($5.94 billion) for the first nine months due to asset sales.
Underwriting profits in the third quarter of 2016 were strong, RSA said in a trading statement, following a record underwriting profit in the first half.
Mr. Hester told Reuters that the process was “advanced” to sell or reinsure the firm’s legacy insurance business, which consists mainly of asbestos claims from its employers’ and public liability cover dating back to as much as 50 years ago.
The firm’s commercial business was exposed to Hurricane Matthew, which hit the United States and the Caribbean last month with estimates of up to $8 billion in insurance losses, and also to the collapse of South Korean shipping firm Hanjin, but losses were likely to be small, Mr. Hester said.
RSA’s cost-cutting program was likely to reach £250 million by the end of 2016 against a £350 million ($431.5 million) target by the end of 2018, chief financial officer Scott Egan said on the media call.
The slide in sterling following Britain’s vote to leave the European Union had helped RSA’s earnings, as 70% of its operations are overseas, Mr. Hester said. RSA has businesses in Canada, Ireland and Scandinavia as well as Britain.
But the Bank of England’s cut in its base interest rate in August had hit the group’s pension liabilities, causing a swing from a small surplus to a deficit of slightly more than £200 million ($246.6 million), he added.
Last year rival Zurich Insurance Co. walked away from an agreed takeover of RSA due to problems in its own business.
“The share price has rallied well ... but on the downside we believe that in doing so it has materially reduced the possibility that the company will be bid for,” Barrie Cornes at Panmure Gordon said in a client note.