2020 Half Year Results: chief executive's statement

Financial results

Our underwriting profits rose 33%1. In turn this drove a 13%1 increase in the business operating result. Earnings per share rose to 23.5p1 on an underlying basis, producing a return on tangible equity of 16.7%1. Statutory earnings were down 7% impacted by a variety of COVID-19 related charges.

These results are driven by business improvement actions taken over recent years and focussed on underwriting quality, whilst pushing hard on cost efficiency. Even excluding COVID-19 impacts, attritional loss ratios have improved again, as have large losses. Weather costs were above prior year though switching in severity from Canada to UK on this occasion.

Customer focus & market conditions

RSA's mission is to serve customers well. In that regard our change efforts continue across the business focused on digital enablement, improving service and sustaining strong and effective claims support. We remain equally dedicated to good and productive partnerships with our brokers and affinity clients. The mutual support and focus on our end customer is much appreciated.

COVID-19 has brought many particular challenges - from an unprecedented shift to 'working from home', to supply chain interruptions and then a range of new claims in those policy areas responding to COVID-19. While never perfect, I am proud of our teams' response to these challenges. RSA has operated near normally throughout the crisis, supporting our customers and responding to the new challenges. There have inevitably been questions around some policy coverage wordings, since few customers, brokers or underwriters had concentrated on a COVID-19 scenario when establishing covers. But we remain determined to pay claims promptly and in accordance with our policies whilst protecting all stakeholders against unaffordable widening of covers. We support the UK legal test case on business interruption wording in that regard as an important contribution to clarity of cover.

Insurance markets inevitably reflect the broader economic conditions around them. As such there are uncertainties and the prospect of a reduction of business volumes as a direct result of COVID-19 and as a result of the economic weakness it gives rise to. We will weather these impacts but will work hard to keep costs in line with any reduced income. Financial markets are also important to insurers. The fall in risk free interest rates hurts investment income and the volatility of credit and other asset classes impacts capital too. We will continue to prioritise resilience and a conservative risk profile in navigating these challenges.