Leaders on what RSA's DLG swoop will mean for brokers

CEO and MD share insights into the next steps of the transaction

Leaders on what RSA's DLG swoop will mean for brokers

Insurance News

By Mia Wallace

There are three elements that make RSA’s acquisition of Direct Line Group (DLG)’s brokered commercial lines business so significant, according to RSA CEO Ken Norgrove – the scale of the transaction, its capacity to bolster RSA’s proposition to its brokers and their customers, and the opportunity it presents for the insurer to accelerate its stated ambition to outperform the market.

Discussing the deal with Insurance Business, Norgrove (pictured left) highlighted how the acquisition came about. As part of Intact, RSA is always scanning the market for the right opportunities, he said, which as evidenced by Intact’s track record, means opportunities where the values of both organisations are very evenly matched. From early conversations, it was clear that the values of the incoming DLG business were very aligned with RSA’s.  

Norgrove noted that deals of this scale – the closing of which will see RSA become the UK’s third-largest commercial lines insurer – don’t come up very often and so offer a “massive transformational opportunity”. The deal is very complementary to the broker distribution strategy recently launched by RSA, he said, and will help the insurance giant deliver an even better proposition to brokers and insureds alike.

What the deal means for RSA’s outperformance ambitions

On the outperformance ambitions set out by RSA at the beginning of last year, he said: “We reset the strategy for RSA. We said we wanted to double down on our commercial lines and specialty lines footprint, we wanted to focus on service to our brokers and improve that. I think we've delivered on all of those areas, and this just helps us to accelerate that strategy.

“If I look at DLG itself, it's run in the mid-90s combined ratio over the last two years - 21 and 22 – [commanding] £530 million of premium, and there's roughly 800 people that will transfer across to us, with almost 300 underwriters within that cohort. Ninety-eight percent of the business is dominated by the two main brands - the NIG brand and the FarmWeb brand – which are really complementary to our business.”

As it stands, RSA has strength in the mid-market and specialty segments, he said, but it has always had a slight gap in its proposition around SME, and particularly online SME. The DLG deal gives it a multiple of three times the current scale RSA has in the online SME market and builds out its small and mid-market proposition for brokers.

He also highlighted that the incoming business has a “great track record” for customer service, holding a four-star rating on its online proposition as well as very high broker engagement scores. That too is complementary to RSA’s focus and re-focus on improving its own broker engagement scores around service over the last 12 months. Overall, the deal gives RSA three winning propositions, he said, in SME, in mid-market and in specialty lines.

Lee Mooney on advancing RSA’s commercial lines strategy

MD of RSA’s UK commercial business Lee Mooney (pictured right) also lent his insights into the acquisition, highlighting how it accentuates the journey RSA’s commercial lines business has been undertaking. He revealed how the deal complements rather than changes the course of that strategy and provides the opportunity to plug any remaining gaps in its commercial lines offering.

“It’s back to the three pillars of that strategy,” he said. “The first being service – this absolutely delivers an improved service mechanism, especially in our online space. We’ve improved our own NPS score by over 24 points over the past 12 months, so we're really starting to embrace customer obsession and making sure that we can deliver a strong service model. And the team at NIG and FarmWeb will bring an attitude that will add real value to that.

“The second area is distribution. We’ve said we want to open the door to many more brokers, but to also re-energise those brokers in that regional and independent space where we didn't have a relationship before. That's the very heartbeat of the NIG business when you look at it – it’s very relevant to those regional and independent brokers, and it capitalises on the plans that we have to bring more energised relationships through the door.”

RSA has already changed over 100 of these relationships year-to-date, Mooney said, and the DLG transaction will accelerate this pace of change, taking the business to the next level when it comes to being relevant to that new broker audience.

“The final bit is around our proposition and our online versus our offline journey,” he said. “We’re exceptionally strong offline in that mid-market, medium to large space. On our online journey, we've had some hiccups over the past but we’ve course-corrected and we've got a really strong, outperforming business. And this deal will add significant scale to that but also from a technology and a product perspective, it'll give us more product spread and it will give us more enablement from a technology perspective to ensure we can step forward.”

Lee Mooney’s pledge to RSA’s broker audience

The key question from brokers is likely around what the transaction will mean for them and their clients and Mooney highlighted that they should expect “the best of both worlds moving forward.” Post the DLG shareholder vote in October, he said, RSA will be looking closely at integration plans which will be underpinned by commitment to providing a service-obsessed business model.

“This won’t be a distraction,” he said. “This will ensure that we can accelerate the plans we have, and we will ensure that our day-to-day service improves every single day from where we are now. And that's a really strong statement we’re making and one we will not falter from.”

The next steps for the DLG transaction

Touching on the next steps for RSA and the incoming DLG business, Norgrove highlighted that the deal has already secured approval from the respective boards of Intact and DLG. DLG shareholders will have their opportunity to vote on the deal, which he said is expected to happen in mid-October. After the transaction and all regulatory approvals have been received, RSA will have full controlling rights in the business having acquired its unearned premium reserve.

“Therefore, immediately from that shareholder vote, the financials of that business from that day forward, including the premium reserve, will be reported in the RSA and Intact results,” he said. “We have an outside-in view of the integration planning, which we will validate as soon as we are able to officially talk to our new colleagues after the shareholder vote. And our plan is to start the business transfer from Q2 2024, subject to all of those validation [considerations].

“We think we have a solution already through the due diligence process, which means it'll be seamless to brokers. So brokers won't have to do anything, they won't see anything, they won't see dramatic changes. And that's our intention - to make this completely seamless to the brokers… What we hope they’ll see is [just] the best businesses coming together and making another step-change improvement in the broker service strategy we’ve already laid out.”

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