R&SA Proves Less Is More as 1st Half Results Beat Expectations; Codan Not For Sale; Best Comments

The U.K.’s Royal & SunAlliance seems to have chosen a winning strategy by concentrating on its P/C business in its home market, Canada and Scandinavia. The company posted a 1st half operating profit of £192 million ($355 million), a 60 percent increase over the same period last year and well ahead of analysts’ forecasts.

Chief Executive Andy Haste commented: “We’ve made strong progress on executing our strategy during the half while producing another set of good results from our ongoing businesses. With the successful sale of UK and Scandinavian Life we will have completed our long term goal of exiting life business to focus on general insurance. This is a major step forward and will significantly derisk our balance sheet. Together with the work to optimise our debt structure it will also strengthen our capital position and gives us confidence of complying with the new regulatory regime.”

While operating results fell 14 percent to £301 million ($556 million), investors took the decline in stride, as reflective of the successful strategy as well as the ongoing expense connected with R&SA’s exit from most of its U.S. business. They were also pleased that there were no “surprises” in the earnings announcement, especially concerning any additional reserve requirements.

The company’s combined ratio from its ongoing business was a healthy 93.6 percent, while its overall combined ratio was 99.7 percent.

As previously indicated (See IJ article August 11), R&SA has shelved plans to sell its 71.7 percent stake in Danish insurer Codan.

Commenting on the results, A.M. Best said the financial strength rating of A- (Excellent) of Royal & Sun Alliance Insurance Group plc and its core subsidiaries “remains unaffected following the release of R&SA’s half-year results for 2004 and the recent announcement of the sale of the U.K. life operations. The outlook remains negative.”

Best also noted that “due to a significant number of divestments over the past year, net premium for the 2004 half year decreased to GBP 2.5 billion (USD 4.6 billion), compared with GBP 3.7 billion (USD 6.9 billion) for the 2003 half year. In line with A.M. Best’s expectations.”

Best concluded that, “as expected, results for the ongoing operations in the United Kingdom, Scandinavia and Canada continue to improve despite high ongoing costs associated with the restructuring of the discontinued U.S. operations.”