RSA Posts 2010 Weather Impact Update; 2011 Outlook

January 20, 2011

The UK’s RSA announced that the “impact of the adverse weather in November and December 2010 to be around £142 million [$229 million] more than normal levels and for the full year to be around £255 million [$408 million], or 3.5 points on the COR, more than normal.

“Compared with the prior year, the total impact of weather across the Group is expected to be around £175 million [$280 million] worse or approximately 2.4 points on the COR. RSA expects its full year 2010 results to show net written premium growth of 11 percent, a COR of between 96.5 percent and 97.0 percent and an operating profit in the range of £600 million to £630 million [$960 to $1 billion].

“Given the extreme weather in 2010, this is a strong result and reflects the diversity of the portfolio and the resilience of the Group’s underlying profitability. RSA remains committed to sustainable profitable performance and in 2011, as it stands today and assuming a return to more normalized weather, expects to deliver continued premium growth, a combined operating ratio of better than 95 percent, investment income of around £550 million [$880 million] and total investment gains of around £50 million [$80 million].The Group’s dividend policy is to increase the dividend at least in line with inflation and the adverse weather in 2010 will not impact this policy.”

Group CEO Andy Haste commented: “This is a strong result in what has been an extremely tough year for the industry, including the European freeze and Chilean earthquake in the first quarter and the coldest December in the UK for 100 years. To deliver a COR of between 96.5 percent and 97 percent in these conditions underlines the strength and resilience of our portfolio. We look forward to 2011 with confidence and, as our guidance today shows, expect to deliver continued premium growth and strong profitability.”

RSA added the impact of adverse weather across the group in November and December 2010 is around £142 million [$227 million] more than normal levels, of which £110 million [$176 million] is in the UK, £17 million [$27 million] across Scandinavia, £7 million [$11.2 million] from Ireland, £6 million [$9.6 million] in Emerging Markets, mainly due to Hurricane Tomas, and £2 million [$3.2 million] in Italy.

“In the UK, around £72 million [$115.2 million] of the adverse experience relates to Household, where we have a market share of around 6 percent, with a further £26 million [$41.6 million] in Commercial Property and £12 million [$19.2 million] across Motor and other classes.

In Household, we have experienced a significant increase in claims relating to burst water pipes with around 8,000 claims at an average cost of approximately £6,700 [$10,718.93] received since 1 November, with volumes peaking in the weeks around Christmas, as well as an increase in claims from Household schemes. In addition, we have received almost 19,000 home emergency claims, around 5,500 snow claims and almost 5,700 other weather related claims.

“Our UK call centers handled around 90 percent more calls than normal in December and to date, we have received over 82,000 more calls than usual. In Commercial Property, we have experienced over 2,300 claims, with around 15 claims accounting for approximately 23 percent of the adverse impact and the remainder being smaller losses.”

Across the Motor book, in the period from the 26th of November up to the 24th of December, RSA said it “experienced around a 70 percent increase in single vehicle accidents and around 20 percent more accidental damage claims compared with early November. In Scandinavia, December was reported to be the second coldest ever recorded in Denmark and the coldest since 1915 in Stockholm.

“The impact of this freeze is around £17 million [$27.2 million] more than normal levels, with the cost spread evenly across Personal and Commercial lines driven by an increase in burst water pipes and motor claims. The impact from Ireland is around £7 million [$11.2 million] more than normal levels, with the cost again driven by burst water pipes as the country experienced the coldest December on record. Across the Group, our customers remain our key focus and we mobilized additional resources to ensure they received a prompt response, with claims dealt with as quickly as possible.”

RSA said that for the full year of 2010 it had “continued to build good momentum, with net written premiums for the twelve months to 31 December 2010 of £7.455 billion [$11.925 billion], an increase of 11 percent (8 percent at constant exchange) compared with the prior year.” The increase in net premiums written was also apparent when broken down according to the regions in which RSA operates
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The bulletin pointed out that “2010 was a challenging year for the industry, with extreme weather throughout the year and the Chilean earthquake in February. Against this backdrop, we expect to deliver a strong result for the full year, with a COR of between 96.5 percent and 97.0 percent, compared with our previous guidance of around 95 percent due to weather losses being around £255 million [$408 million] worse than normal levels and £175 million [$280 million] worse than 2009.”

Source: RSA Group

Topics Claims Trends

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