After the closing of the Intact-RSA transaction, Stephen Hester, CEO of the acquired company, was expected to bow out after seven years of service with the British insurer.
That plan is still in place. However, RSA's footprint will remain within Intact: One of the insurer’s senior executives has been appointed to lead international operations.
Coinciding with the announcement of RSA's 2020 results, Hester wrote a letter to the company's shareholders, tracing his history with the UK insurer and clarifying why RSA agreed to sell its business. He points out that RSA concluded 2020 with its fourth record underwriting result in five years.
“RSA’s results for 2020 are a remarkable achievement, a reflection of 7 years of business building and in turn were the foundation for showcasing the attractiveness of RSA’s business in discussions with Intact and Tryg,” Hester explains.
“We were not looking to sell”
He pointed out that the offer filed by these two insurers was 52% higher than its undisturbed share price. “The high value placed on our business was testimony to its strength and attractiveness. We were not looking to sell and RSA’s future was bright as an independent company.”
In a liberal market economy, however, shareholder value is rightly prized, forming the basis as it does for returns on savings and pensions and a well-functioning economy, Hester continued. “There is no doubt this bid offers our shareholders exceptional value. But the future for other stakeholders is also safeguarded. Our businesses will live on with their new owners, our people will have the opportunity of great careers and our customers will continue to be serviced well,” he says.
He goes on to explain that RSA has had to work hard to turn its financial profile around, particularly in terms of its capital and its exposure to certain risks, including damage caused by natural catastrophes. As part of its efforts, RSA targeted best in class performance, Hester says.
“But ‘best in class’ is a mission more than a destination,” he added. “Our competitors will keep improving, and we must also to sustain the gains so painfully won. Even in the UK, our most difficult market, performance is much improved (at least ex covid impacts), and we can see our way to the targeted results within the coming few years.
Business Resilience
RSA has demonstrated its resilience in 2020 in response to the COVID-19 pandemic. “It’s not just about strong capital. It’s also about strong operations and effective risk management. But above all it’s about the ability to absorb blows, externally or internally generated, and to come back effectively. No business can be perfect. Mistakes will occur, weaknesses be uncovered and the unexpected transpire.”
This resilience will be further tested, he says, emphasizing that companies, including RSA, need to invest strongly in digital and ensure more modern delivery of their products. “The pandemic has required us to do all this whilst suddenly shifting to home working. We met this challenge well. However, there is always more we aspire to do and plenty of room to improve. That is a challenge that will never subside,” he explains
Regardless of whether the transaction with Intact goes through, Hester says RSA's journey is not over. “We have momentum into 2021. I’m confident we will do well up to when ownership changes and beyond, and in the unlikely event the bid does not complete, the future will be bright nevertheless.”
An international footprint
To preserve RSA’s legacy, Intact Financial Corporation, has announced that Scott Egan will remain Chief Executive Officer of RSA's UK and international business. Egan will also sit on the Executive Committee of Intact Financial Corporation and will report to the Chief Executive Officer, Charles Brindamour.
"Scott Egan has done an excellent job as CEO of RSA's UK and International business over the last two years. He has built a great team and culture and significantly improved performance,” Brindamour said.
Egan noted that RSA's UK and international business has made real progress over the past two years. “Our focus is on maintaining this momentum. RSA's people are passionate about improving for our customers alongside continuing to strengthen our financial performance, and our future as part of Intact will enable us to do both at an accelerated pace,” he explained.
