RSA has become the latest to reveal the ongoing impact of the COVID-19 pandemic on its Q3 2020 financial results. The group highlighted that insurance market conditions were largely unchanged in Q3 and that the impact of the crisis on the business is ongoing. Non-COVID-19 claims frequency was down from last year in Q3, in a range of 8-36% which the insurer said mostly reflects lower economic activity.
Group net written premiums of £4,663 million are down 3% from Q3 2019 (excluding the estimated impacts of COVID-19 and in line with its plans) and, in UK & International, premiums are down 6% to £1,998 million (or 2% excluding the estimated impact of COVID-19). Meanwhile, the group business operating profit for the first nine months of 2019 is up and registered an improved combined ratio and lower investment income, even with the addition for the UK BI Court case in September.
RSA noted that since the half year reporting, there have been no material increases in COVID-19 related claims reserves outside those relating to business interruption claims in the UK. The insurer increased claims reserves (IBNR) by £62 million net of reinsurance in respect of the ruling from the FCA test case, and allowing for the latest position on the Group Volatility Cover. The majority of this has been booked as large losses (c.75%) with the remainder booked within the attritional loss ratio.
The group highlighted that it, and the other parties to this case, have filed an appeal to the judgement to the Supreme Court under a “leapfrog” appeal process, the results of which are expected later this year. Its estimate of the gross impact of the initial ruling as published on September 15 has been revised down by c.£20 million, which reduces the likely claims on reinsurers but has little impact on the net cost absorbed by RSA as outlined above.
The group stated that, to date, there has been no material increase in claims activity related to a COVID-19 “second wave” in its various territories. It also noted a COVID-19 effect on premium income for customer reliefs and various other direct economic impacts, which has so far totalled c.£156 million year to date.
Commenting on the results, Stephen Hester, RSA Group CEO, said that the insurer’s run of record underwriting results is continuing and that the group recorded a Q3 discrete combined ratio of 90%, despite providing fully for the UK BI Court ruling in September.
“While COVID-19 has held back our profit overall,” he said, “RSA’s inherent strength and the improvements we have made are driving the business forward in a pleasing manner. The outlook for continued underwriting improvements remains positive.”