U.K. insurance group Royal & SunAlliance has made its first annual net profit since 1999. It posted an after-tax profit of £605 million ($1.1 billion) for 2005, compared with a loss of £80 million the year before.
The company's combined ratio for the year was 97% compared with a 105% ratio in 2004. The combined ratio for the company's core units – the U.K., Scandinavian, international and group reinsurance businesses – was 94% in 2005 compared with 96% in 2004.
Roger Doig, analyst at JPMorgan, says the results were good. He points out that RSA's operating performance has been strong for a few years. The company has taken a number of steps since 2003 to turn around its performance, including pulling back from the U.S. market and divesting its life insurance businesses.
"We have seen with Aviva and Skandia that the fourth quarter was really good, and Royal & SunAlliance has also posted a good combined ratio," he says. "It's a good set of results but that is an extension of what the company has already been doing. Its performance turned around over the past two or three years. It may be its first accounting profit for a number of years but it has been doing well for some time"
Andy Haste, CEO of RSA, said in a statement that the company's core business has performed well, and made note of the progress it has made in reducing its U.S. exposures. In 2005, RSA reduced U.S. staff by 60%, open claims by 37% and collected $1.3 billion of reinsurance.
But analysts were disappointed that the company had not closed its U.S. business completely. RSA has given no indication of when its U.S. unit will finally close.
"It would have been nice to see resolution of the U.S. business," says Doig. "I expect a fairly near-term improvement from that point of view."
RSA is bullish about how it will perform this year as well. "As we see it today, we would expect the core group to deliver a combined operating ratio of about 95% in 2006," said Haste.
Doig says this target is plausible. But he points out a number of challenges facing RSA in its core markets.
"For its continuing business, there are questions about whether the U.K. commercial market is heading downwards," he says. "That is definitely an issue for the company and may be area of concern for investors going forward. Also more than [RSA's U.K. personal lines operation] is in a very competitive environment with competitors such as Direct Line forcing it to invest more in infrastructure. The Scandinavian business is good, but there is some pricing pressure there as well."
The company's combined ratio for the year was 97% compared with a 105% ratio in 2004. The combined ratio for the company's core units – the U.K., Scandinavian, international and group reinsurance businesses – was 94% in 2005 compared with 96% in 2004.
Roger Doig, analyst at JPMorgan, says the results were good. He points out that RSA's operating performance has been strong for a few years. The company has taken a number of steps since 2003 to turn around its performance, including pulling back from the U.S. market and divesting its life insurance businesses.
"We have seen with Aviva and Skandia that the fourth quarter was really good, and Royal & SunAlliance has also posted a good combined ratio," he says. "It's a good set of results but that is an extension of what the company has already been doing. Its performance turned around over the past two or three years. It may be its first accounting profit for a number of years but it has been doing well for some time"
Andy Haste, CEO of RSA, said in a statement that the company's core business has performed well, and made note of the progress it has made in reducing its U.S. exposures. In 2005, RSA reduced U.S. staff by 60%, open claims by 37% and collected $1.3 billion of reinsurance.
But analysts were disappointed that the company had not closed its U.S. business completely. RSA has given no indication of when its U.S. unit will finally close.
"It would have been nice to see resolution of the U.S. business," says Doig. "I expect a fairly near-term improvement from that point of view."
RSA is bullish about how it will perform this year as well. "As we see it today, we would expect the core group to deliver a combined operating ratio of about 95% in 2006," said Haste.
Doig says this target is plausible. But he points out a number of challenges facing RSA in its core markets.
"For its continuing business, there are questions about whether the U.K. commercial market is heading downwards," he says. "That is definitely an issue for the company and may be area of concern for investors going forward. Also more than [RSA's U.K. personal lines operation] is in a very competitive environment with competitors such as Direct Line forcing it to invest more in infrastructure. The Scandinavian business is good, but there is some pricing pressure there as well."
