2016 PRELIMINARY RESULTS 23 February 2017
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION This presentation may contain ‘forward-looking statements’ with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial condition, performance, results, strategic initiatives and objectives. Generally, words such as “may”, “could”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “aim”, “outlook”, “believe”, “plan”, “seek”, “continue” or similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performance. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the Group’s control, including amongst other things, UK domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities (including changes related to capital and solvency requirements), the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation or regulations in the jurisdictions in which the Group and its affiliates operate. As a result, the Group’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in the Group’s forward-looking statements. Forward-looking statements in this presentation are current only as of the date on which such statements are made. The Group undertakes no obligation to update any forward-looking statements, save in respect of any requirement under applicable law or regulation. Nothing in this presentation should be construed as a profit forecast. Basis of presentation This presentation uses alternative performance measures, including certain underlying measures, to help explain business performance and financial position. Further information on these is set out in the 2016 Preliminary Results announcement.
AGENDA Introduction 1 2 Strategy & Action Plan Progress Regional update 3 4 2016 Preliminary Results 5 Q&A
INTRODUCTION
Introduction THE RSA PROPOSITION 1 ‘Focused mid-cap’, a proven value strategy in P&C Insurance 2 A ‘self help’ story with increasingly ‘high quality’ underpinnings 3 Resilient in challenging economic and financial market conditions Attractive EPS 1 & dividend increases – delivered and in prospect 2 4 Momentum ahead of ‘street’ expectations; good value if progress 5 continues 1 Refers to Underlying EPS 2 Based on consensus and Company targets/ambitions 5
Introduction 2016 HIGHLIGHTS Winning for customers and for shareholders Strategic refocus completed & balance sheet transformed 1 Excellent performance progress, driven by fundamentals 2 Record 1 underwriting profits & combined ratio 3 ROTE 2 in upper part of our 12-15% target range 4 Now focused on move towards ‘best in class’ performance 5 1 Since 2005 on like-for-like basis 2 Refers to underlying ROTE 6
Introduction 2016 FINANCIAL HIGHLIGHTS Group premiums up 6% (flat at constant fx) ex disposals. Underwriting result of £380m in 2016, up 73%: • Current year underwriting profits of £271m. • Combined ratio 94.2%, 2.7 points better than FY 2015. • Strong performances in each of Scandinavia, UK and Canada. Controllable costs down 8% (in ‘real’ terms). c.£290m of >£350m 2018 cost reduction target now delivered. Target upgraded to >£400m by 2018. Operating profit £655m, up 25%. Underlying EPS of 39.5p, up 42%. ROTE 1 target upgraded to 13-17%. Solvency II coverage ratio of 158% (2015: 143%). UK Legacy sale gives further 2017 boost. Final dividend proposed of 11p per share. 16p per share total for the year, up 52%. 1 Refers to underlying ROTE 7
STRATEGY
Strategy PURSUIT OF OUTPERFORMANCE Strong customer franchises 1 2 Disciplined strategy, focused on strengths, seeking to avoid mistakes A balance sheet that protects customers and the company 3 Intense and accomplished operational delivery - addressing customers, 4 underwriting and costs 9
Strategy LEADERS IN OUR MARKETS, WITH ATTRACTIVE BUSINESS BALANCE Marine & other 8% Commercial Household Commercial Motor 23% 10% By Liability By 10% 47% Customer… 53% Product… 19% Motor 20% Property Personal 10% Other UK & Scandinavia International 1 Direct 28% Indicative By 40% 40% target distribution 54% profitability channel… mix Affinity 18% Broker 20% Canada 1 Includes Ireland, Specialty businesses in the Eurozone, and Middle East 10 Note: Split based on 2016 Core Group NWP, except indicative profitability - based on operating profit ambitions
Strategy ‘FOCUSED MID-CAP’ PROPOSITION 1 2 3 Regional leadership Intense performance Operational and positions focus financial excellence +++ Aim to deliver superior performance and justify a superior P/E 11
ACTION PLAN
Action Plan ACTION PLAN Turnaround done Pursuit of outperformance 2014 2015 2017 2018 & beyond 2016 Customer actions Strategy implemented – Digital for convenience, flexibility and speed – Focus on strongest businesses – Improve service standards – 19 disposals completed – Increase customer satisfaction and retention – Sharpen customer acquisition tools Balance sheet fixed Underwriting actions − £1.2bn disposal proceeds – Elevate underwriting disciplines − £750m Rights Issue – Ongoing ‘BAU’ portfolio re-underwriting – Invest in tools and technology − Solvency II delivered – Optimise reinsurance − Debt restructuring actions Cost actions Performance restored – Lean/robotics/process redesign − 2013 1 : 100.0% COR; £1m underwriting profit – Procurement/spans and layers − 2016: 94.2% COR; £380m underwriting profit; – Simplify offerings Underlying ROTE 14.2% – IT change People, management and culture Foundations laid to power next phase – Build sustainable outperformance 1 Like-for-like basis 13
Performance PERFORMANCE IMPROVEMENT Management Approach Improvement Actions What is ‘best in class’ performance and Performance improvement actions in 5 how do we get there in our markets? areas: For each activity: • Customer capabilities 1 • Compare to ‘best in class’ in 1 customer capabilities, underwriting • Underwriting improvements 2 excellence, costs and technology Cost efficiency • 3 Identify capability gaps and • 2 roadmap to improve Technology • 4 • Validate and sequence change 3 • People 5 initiatives 14
Customer SERVING CUSTOMERS BETTER 1 Multi-channel Enhance direct/broker/affinity choice for clients. distribution Speed, convenience & Digital trends at the forefront. flexibility Customer Actions Proposition Sharpen customer propositions. Service Differentiate on service standards and delivery. Satisfaction Target strong NPS and effective brand promise. 2 Salesforce effectiveness Multiple initiatives to improve delivery to customers. Trading capabilities Greater agility in pricing and policy coverage. Sales Actions Pricing expertise Richer risk segmentation. E-trading ‘Industrialisation’ of delivery. 15
Customer CUSTOMER MEASURES SOLID IN 2016; AMBITION TO DO BETTER STILL Customer satisfaction measures: improving but still more Retention rates stable to do Retention (%) FY14 FY15 FY16 83 82 82 74 75 Scandinavian trust scores 73 Dec-15 Dec-16 Scandi -navia Personal Commercial 87 87 85 80 76 76 Swe Swe Den Den Nor Nor inbound claims inbound claims inbound claims Canada Canadian NPS UK NPS Dec-15 Dec-16 Dec-15 Dec-16 Personal Commercial 85 83 81 77 72 70 UK Johnson Johnson Johnson Broker UK CL UK PL UK PL sales service claims claims direct intermediated Personal Commercial 16
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