Confidence in RSA Chief Wanes as Poor Results, Asset Sales Continue

Royal & Sun Alliance CEO Bob Mendelsohn is on the receiving end of increasing criticism from analysts and the investment community for the poor performance his company has experienced, and its plans to dispose of at least eight of the Group’s remaining assets.

Following the announcement that there would be no profits from last year’s operations due to higher than expected losses and the need to increase reserves (See IJ Website Feb. 6), R&SA announced that it had failed to reach one of its primary goals – decreasing its combined loss ratio to 103 percent. It’s closer to 105 percent even when its £215 million ($305 million) in claims from the WTC attacks is deducted.

Despite Mendelsohn’s assurances that premium increases would produce solid growth figures for the current year, analysts remain skeptical. An article in London’s Financial Times indicated that after four years of trying to turn the company around, he was still far from his goal, and that his main solution, selling off R&SA’s assets, which Mendelsohn estimates will produce some £800 million ($$1.14 billion), in order to fund additional growth didn’t seem very likely.

The article also pointed out that in its current condition, after the reserve strengthening, R&SA has barely enough capital to support last year’s level of net written premiums, and without additional capital it would not be able to achieve any growth.