RSA Insurance Group PLC (LON:RSA) said underlying pre-tax profit fell in the first quarter due to elevated winter costs and warned that market pricing remains subdued.
In a trading update, the company said weather costs accounted for 5.1% of net earned premiums in the first quarter, which was 3.1 points higher than the same period a year earlier and 1.9 points above the five-year average of 3.2%.
However, chief executive Stephen Hester said: “The underlying business is tracking consistent with our ambitions overall, whilst winter weather volatility is a normal part of our business. Headline profits are also strongly up, reflecting the absence (as planned) of restructuring costs."
Shares rose 2.1% to 649p in morning trading.
Gross written premiums rose 1% at constant exchange rates to £2.09bn.
Net written premiums increased 2% on an underlying basis to £1.52bn. But at the headline level, reinsurance costs for the triennial GVC renewal, a reduction in retention levels for certain programmes and rate inflation in reinsurance areas such as UK motor dampened net written premiums by £197mln.
READ: RSA Insurance’s 2017 operating profits beat forecasts, boosted by strong overseas performances
The large loss ratio improved to 9.7%, trending closer to the five year average of 9.0%.
The group’s Solvency II capital ratio fell to 162% at the end of March from 163% at the end of December. Balance sheet unrealised gains stood at £352mln, down £76mln or 18% since year end, due to higher bond yields.