The Irish subsidiary of British insurance group RSA reduced its underwriting loss last year to €22 million as it continued to rebuild its business here following the emergence of major financial issues in late 2013.
This compared with an underwriting loss of €198 million in 2014, according to accounts just filed for RSA Insurance Ireland Ltd. RSA has drawn up a plan to restore the company to profitability and to generate acceptable returns on capital by 2018.
Its loss ratio reduced to 88 per cent of premium income, down from 101 per cent a year earlier.
The accounts show a small decrease in its gross written premium to €375 million in 2015. This is attributed to its focus on disciplined underwriting and withdrawing from business segments were losses were not sustainable, especially in motor cover.
RSA’s accounts note that it signed an “adverse development cover reinsurance contract” with its listed parent company, which covered claims incurred up to the end of 2014 up to a limit of €725 million. It paid a premium of €250 million for the cover.
It also entered into a quota-share contract for premiums earned last year, covering 70 per cent of exposures. The premium for this cover was €253.6 million. Other reinsurance contracts amounted to €38.8 million.
The RSA group injected another €25 million in equity share capital last year, down from €137 million in 2014. This is expected to fall further in 2016.
The insurer also undertook a number of cost-cutting measures to help return the business to profitability with its expense ratio reducing to 18 per cent from 27 per cent in 2014.
RSA closed its defined-benefit pension scheme to further accrual in January of this year, switching to a defined-contribution model.
It also reduced its employee numbers – from 508 to 445 – through a voluntary redundancy programme that cost €7.3 million.
In addition, RSA reviewed the terms and conditions of staff, renegotiated third-party contracts and set up a more efficient customer-service unit in Galway.
Significant headwinds
Commenting on the results, RSA Ireland chief executive Ken Norgrove said: "We are satisfied with the progress made to date in turning around the business. The Irish insurance market has been challenging for some time now with significant headwinds in claims environment for the motor and liability sectors.
“There is a very volatile claims environment driven by the high levels of compensation award in the courts and associated legal costs. This has been further compounded by the ruling in relation to the collapse of Setanta, which is seeking to force the rest of the insurance market to pick up the cost for the failings of other companies. We have been single-minded in driving costs out of our business while managing our top-line revenue.”
RSA was Ireland's biggest insurer but ran into difficulties in late 2013 when a number of accounting and financial issues emerged. This led to the suspension of three senior executives, including the then chief executive Philip Smyth, and the RSA group injecting more than €400 million into its Irish subsidiary.
Mr Smyth later secured an award from the Employment Appeals Tribunal of €1.25 million. A legal dispute over the award was settled earlier this year for an undisclosed sum.
