RSA Preliminary Results Presentation 27th February 2020 RSA - PDF document

RSA Preliminary Results Presentation 27th February 2020

RSA Stephen Hester, Group Chief Executive Charlotte Jones, Group Chief Financial Officer Scott Egan, Chief Executive Officer, UK&I Questions From Freya Kong, Bank of America Andreas Van Embden, Peel Hunt Greig Paterson, KBW Dominic O'Mahony, Exane BNP Paribas Barrie Cornes, Panmure Gordon Faizan Lakhani, HSBC Andrew Crean, Autonomous Ben Cohen, Investec

Business Review Stephen Hester, Group Chief Executive Perfect, good morning everyone. Thank you for joining us. We seem to be a slightly diminished band here; I don’t know whe ther analysts are particularly affected by snowflakes in the Home Counties or other problems in getting here. But in any event at least it’s a webcast, so thank you all for joining us. The format is the same as usual; Charlotte and I will canter through the slides of our presentation. An d then obviously we’ll do Q&A. A nd welcome to my colleagues who are sitting here on the front row who may get tossed any of the more difficult questions. You’ll see immediately, for which I only half apologise, the impact of Scott’s cost cutting programme in the UK because we can no longer afford to do slides across two screens, on ly one. And so you’ll have to squint a little bit and see the left hand slide only but you have got them on your laps in terms of the packs. I guess the summary of our feelings about 2019 on which we’re reporti ng, is that we think that the Group did well and we think that our results are strong. You can see that obviously in terms of profits up on all measures. You can see in terms of the ongoing business, underwriting profit £405m, combined ratio 93.6, both of these are I believe all-time records for RSA. And that’s 44.5p per share and a return on equity in the upper part of our target range. So we’re pleased with that as a starting point, and of course beneath that it is driven by underwriting progress which is a function of the pricing and the underwriting actions that we’ve taken in every region. And you can see that as you go through the different aspects of the P&L which Charlotte will take you through. Although there are highlights to talk about across the business, clearly one of the most important things we had to do was turn around our UK business which we have been struggling with. And I think while there is much more to do, we are reporting for the region, UK&I, a 95 combined ratio, a return to some level of form and a good basis on which to go further. I mentioned the cost reduction programme; we’ll talk more about it. And so all of that is allowing us to put our divide nds up by 10%, that’s a 52% pay out ratio. And you’ll see that we are also, and we’ll talk about this some more la ter, able to increase our dividend payout ratio target from 40% to 50%, to 50% to 60%, and our capital remains robust. But it will continue to be very much our philosophy that we will keep a strong balance sheet, we will focus on quality of earnings and dividends will follow profits and not lead them. So moving into my part of the presentation. At the beginning of this year, and in the light of a setback that we had, the only year of setback we’ve had since 2013, in 2018, we set some particular goals for 2019.

If you like a simple scorecard is on this slide. We continue to believe that our business can be managed towards a best in class financial targets and ambitions so we are reaffirming those. One of our major tasks for this year was to keep going in the areas that were performing well. Although I’m generalising a little bit broadly, that was our Personal Lines businesses, which were performing very well in 2018. And have performed even better in 2019, which as something like 60% of the group is clearly important to us. So we were able to do that and we were able to keep our cost discipline, with costs flat or down 2% real, despite significant investment in the business in technology in particular. But in addition to keeping the good things going and making them better, we needed to fix some things that were not going well. So we have decent progress to report on that also. The Exits are largely implemented, roughly £250m of premium out from our London Market businesses. Only £15m left to run off in terms of premium this year and some tail a bit after that. And related to that we restructured the UK, we’ll talk about that some more later, we’ve put in place UK cost programme s and so that’s , if you like, tidying up the whole refocus area to allow us to perform better. My reflection so far, looking at both the losses on the lines that we have exited and at competitor results in comparable business lines, whether from Swiss Re or Allianz or XL, is it feels to me like it has been the right thing for RSA to make these portfolio exits. But away from the portfolio exits there was a lot more we wanted to do in our Commercial Lines businesses to improve our underwriting success. In terms of constraining volatility we put in place new reinsurance programmes, which in my view unfortunately we needed in both Canada and Scandi, but at least we got some value for them in Canada and Denmark. And the Commercial Line improvement has shown large losses have come down in every region. We’ve go t attritional loss improvements, the UK&I has bounced back nicely into profit. And while Canada and Denmark Commercial Lines are still not in profit, I confidently believe they will be this year as our actions earn through. So now let me if you like stand back and go through the normal slides that I take you through in terms of what we’re trying to do on our progress. The strategy is unchanged so I won’t dwell on this one but the fact th at it is unchanged is the platform which enables us each year to try and grind out improvements overall. And it remains the case that we are happy with the balance of our business in the round across our three territories, their complementary and our ability to manage within them. We’re trying to do the same things every year, we’re trying to do better for customers, we’re trying to underwrite smarter, and we’re trying to be more cost efficient. Nothing about those levers has changed, nothing about our own ambitions has changed or what we think we can accomplish.