Shares in Royal & SunAlliance, the UK general insurance group, plunged almost 6 per cent in early trading yesterday, as the group admitted that it could face further adverse claims in its troubled US division over the coming months.
Reporting its third-quarter results, which came in at the upper end of analysts' expectations, the group conceded that it was unsure of the potential total costs from existing workers' compensation claims in the US. However, it added that it was confident that any surprises would be covered by its group contingent liabilities allowance.
The shares recovered slightly later in the day, to close at 76.25p, down just 2.25p on the previous day's close.
Andy Haste, the group chief executive, said that in spite of some uncertainty in the US, the group's restructuring of its American operations was going well. He said the company was slowly withdrawing entirely from the US market, except for its non-standard auto business, which continues to be very profitable. "The transition in our US business is on track," he said. "For the hurricanes [over the last few months], we got hit for just £14m. Had we not restructured, and reduced some of our risk in the US and Caribbean over the past year, that loss would have been around £150m net.
"What we did flag up to investors today is that we've seen some potential for adverse developments. It's too soon to see what the outcome may be. But from our standpoint, we wanted to be transparent to the market about what's going on in the group."
RSA also announced the sale of its Japanese general insurance arm for £92m to the American Home Assurance Company yesterday. Mr Haste said the sale represented an exceptional return to shareholders with the price at around four times the book's net assets. "This was not a business we were going to continue investing in," said Mr Haste. "For us, it presented some risks we weren't happy with. It's got some earthquake risk that we're not interested in, and it's not a place we wanted to put our capital."
Overall, the group reported an operating result of £453m for the first nine months of the year, at the higher end of analysts' expectations. In its ongoing operation, the group's combined ratio fell to 94.5 per cent from 96.2 per cent. A figure under 100 per cent represents a profit. Including its non-ongoing businesses, the group's combined ratio was 100.9 per cent.Reuse content