RSA Ireland 2016 capital boosted by off-balance deal with parent
Insurer making ‘significant progress’ in returning to sustainable profitability
The company logo for RSA Insurance Group Plc. Photographer: Simon Dawson/Bloomberg
RSA Insurance Ireland has revealed in its annual report the extent to which its capital level, a key measure of financial strength and ability to withstand surprise losses, was boosted last year by an off-balance sheet deal with its UK parent.
The Irish Times reported in May 2016 that London-based RSA Group had committed €90 million to its Dublin-based unit, if needed, to bolster its balance sheet under new solvency rules, known as Solvency II, which came into effect at the start of that year.
The off-balance sheet deal helped to boost RSA Insurance Ireland’s so-called Solvency II ratio to 128 per cent at the end of last year from 111 per cent at the close of 2015, according to the annual report, filed with the Companies Registration Office this week.
A ratio of 100 per cent means that an insurer has enough capital on its balance sheet to meet its obligations in the event of a severe shock that is expected once in every 200 years.
The RSA Group had previously reported in February that the Irish division’s operating loss widened by 62 per cent to £42 million in 2016 after the country’s once-largest general insurer was forced to set aside £50 million of reserves to cover accidents in 2014 and 2015.
RSA Insurance Ireland said on Friday that the company “continues to make significant progress in returning the business to sustainable profitability”.
The unit is targeting a return to operating profitability this year.
RSA Insurance Ireland received €423 million of cash injections between 2013 and 2015 after the unit was thrown into crisis when it emerged it had a large hole in its balance sheet. This was mainly the result of the business having been found at the time to have set aside too little money in reserve to cover large claims.
The €90 million off-balance sheet deal last year, which was approved by the Central Bank of Ireland, did not involve a transfer of capital.
“Over the last 18 months, the company has made excellent progress in delivering increased revenue, while closely managing its cost base,” Ken Norgove, chief executive of the Irish unit, said on Friday. “Ours is now a more streamlined organisation and one geared to win in the highly competitive Irish market.”
The company’s number of employees fell to 423 last year from 445 in 2015. Wages and salaries fell to €25.3 million from €32.4 million.