2020 Interim Results Presentation Thursday, 1 August 2019 30 July 2020
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 2020 Interim Results announcement.
Agenda Introduction 1 Strategy & business improvement actions 2 Regional update 3 2020 Interim Results 4 Q&A 5
Introduction
Introduction First half 2020 presented unique global challenges Our priorities have been: • To sustain customer service and support • To operate securely and near ‘normally’ from home, safeguarding our people • To secure RSA’s resilience for all stakeholders • To ensure we remain focused on delivering our plans and to perform well in challenging economic times 5
Introduction 2020 Interim Results highlights 1 • Underwriting profit up 33%, COR a record 92.2%, underlying EPS 1 23.5p up 12%, underlying ROTE 16.7% • Result driven by underwriting improvement: 2 − Scandi COR 83.2%, Canada 93.2%, UK&I 93.6% − Weather costs above prior year, large & attritional losses better (ex COVID) • Focus on delivering our plans continues, including underwriting 3 improvement and cost control while facing into a slow economic environment • No interim dividend proposed reflecting COVID-19 regulatory 4 consideration and market uncertainties. Intent to resume as soon as prudent, expected to be by year end Note (1): underlying measures, ex. exits 6
Introduction COVID-19 impact on RSA • Net impact on RSA H1 operating profit broadly neutral. Consisting of: 1 − Lost contribution from lower premiums (c.£110m NWP) − Provision for COVID-19 claims £82m gross, £56m net − “BAU” frequency benefits £129m − Increase in ‘margin’ £25m − £6m reduction in investment income • Premium trends and claims frequency starting to normalise in June but 2 H2 uncertainty remains. UK ‘BI test case’ verdict expected in Q3 • Impacts on investment portfolio/balance sheet: 3 • £54 m ‘below the line’ charges Solvency II ratio 172% 1 (158% 1 post dividend accruals); COVID-19 • market impact 8 points net Note (1): Solvency II position at 30 June 2020 is estimated 7
Strategy & business improvement actions
Strategy Update on 2020 priorities • Sustain high performing business areas: − H1 Personal Lines COR 86.0 % (H1 ’19: 89.9%) – 55% of NWP − Growth impacted by COVID-19 • Continue to improve Commercial Lines underwriting 1 : − H1 Commercial Lines COR 96.8 % (H1’19: 98.8%) – 45% of NWP − Attritional loss ratio improved 1.9 points (ex-COVID) − Large losses improved 1.1 points (ex-COVID) − Exits near complete but recording some tail losses • Cost efficiency remains a priority: UK £50m 2 cost savings achieved; more targeted − − Group written controllable costs down 1% vs. H1 19 1 Ex. UK/ London Market exit portfolios 9 2 Written controllable costs vs. 2018 baseline (gross of inflation)
Strategy Strategy is ‘pursuit of outperformance’ through… 1 Strong customer franchises Disciplined business focus, majoring on strengths, seeking to 2 avoid mistakes A balance sheet that protects customers and the company 3 Intense and accomplished operational delivery – improving 4 customer service, underwriting and costs 10
Performance Performance improvement levers Targets ‘Best -in- class’ COR ambitions • Scandinavia < 85% Advance customer service • UK & International < 94% • Digital platforms for convenience, flexibility and speed 1 • Canada < 94% • Increase customer satisfaction and retention • Sharpen customer acquisition tools Further improve underwriting Earnings • Elevate underwriting disciplines • High quality, repeatable earnings 2 • Ongoing ‘BAU’ portfolio re -underwriting • Attractive EPS increases • Invest in analytics, tools and technology • ROTE 13-17% or better • Optimise reinsurance Drive cost efficiency • Deploy ‘lean’, robotics & process redesign Dividend 3 • Optimise overheads & procurement • Regular payout 50-60%, plus • Site consolidation & outsourcing additional payouts as available • Automation and prudent Technology Key enablers: Underpinned by strong balance Focused performance culture sheet and capital management 11
Customer Customer metrics stable overall, ex. COVID-19 impacts Personal Lines – policies in force Customer retention (%) Scandinavia 0% 87 84 82 -11% 79 -5% Personal Commercial Canada Scandi Canada UK 1 90 89 H1’19 H1’20 85 81 79 77 Commercial Lines – volumes -4% 2 -8% 2 Personal Broker Johnson Commercial -7% 2 UK 80 78 78 74 Personal Scandi Canada Commercial 1 UK 1 H1’19 H1’20 12 Note: Retention excluded the H1’19 H1’20 1 Ex. UK/ London Market exit portfolios COVID-19 impacts impact of COVID-19 2 Excluding impacts of COVID-19
Underwriting Attritional loss ratio improving again Attritional loss ratios (%) 1 Group 2 Scandinavia Of which: Personal Lines 2 59.0% 67.0% 58.2% 57.1% 3 55.4% 54.9% 63.8% 53.4% 3 63.5% 63.4% 3 50.9% 53.7% 61.8% H1’15 H1’17 H1’19 H1’20 H1’19 H1’20 H1’15 H1’17 H1’19 H1’20 Canada UK & International 4 Commercial Lines 2 61.3% 53.3% 50.0% 57.9% 49.9% 56.2% 48.4% 48.0% 3 48.2% 3 52.2% 3 50.5% 42.5% 44.9% H1’15 H1’17 H1’19 H1’20 H1’15 H1’17 H1’19 H1’20 H1’19 H1’20 1 2015 and 2017 loss ratios restated for reinsurance changes 2 At constant FX and ex. disposals where relevant 3 Excluding the impacts of COVID-19 13 4 Excluding UK/London Market portfolio exits COVID-19 impacts
Costs Cost competitiveness remains key part of strategy − Goal is controllable cost ratios below 20% in every business − COVID-19 impact on top line means more to do on cost Group Scandinavia £671m £670m £193m £187m +0.3 points +0.5 points 22.3 21.8 22.0 21.3 H1’19 H1’20 H1’19 H1’20 Canada UK & International £147m £330m £170m £310m -0.6 points +2.5 points 22.9 22.3 20.1 17.6 H1’19 H1’20 H1’19 H1’20 Note: Costs and cost ratios shown on an earned basis, excluding UK/London Market exit portfolios. Group at constant FX. 14
Underwriting Underwriting – Personal Lines 55% of Group Net Written Premiums 1 Summary results H1’20 2 H1’19 2 Canada Scandinavia Net Written Premiums 1,711 1,754 33% 33% . Attritional loss ratio (%) 53.7% 58.2% Weather ratio (%) 2.6% 2.9% 8% COR (%) 86.0% 89.8% 26% International UK Current year COR (%) 86.2% 90.7% Key points: Premium growth in most profitable lines e.g. Sweden +2% 2 and Johnson +12% 2 • • Strong underwriting results in every region: − Scandinavia: Sweden very strong; Denmark good and improvement continues; Norway improved − Canada: Johnson very strong and improved; Personal broker volumes down with performance now hitting target profitability. Strong rate carried across all portfolios − UK & International: Volume reduction driven by lower new business in Personal Motor. UK Household volumes ahead of Plan and retention sharply up • COVID-19 impact: £67m NWP drop, 2.4% COR benefit, 3.4% attritional benefit 1 Split based on HY 2020 Group NWP (ex. exits) 15 2 At constant FX and ex. UK/ London Market exit portfolios
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