RSA Insurance (RSA) continued to benefit from the root-and-branch restructuring that saw more than a dozen overseas operations disposed of, leaving the insurer to concentrate on Scandinavia, Canada, Ireland and the UK.
And the numbers speak for themselves; underwriting profit rose by almost three-quarters in the 2016 calendar year, while the combined ratio (of claims as a percentage of premium income) fell from 96.9 per cent to a record low of 94.2 per cent. And shareholders were rewarded with a hike in the dividend (see table).
Steps have been taken to strengthen the balance sheet still further, including removal of £200m of subordinated debt and the derisking of the asset mix in the UK pension scheme. And in early February this year, the company disposed of its UK legacy insurance liabilities for £834m. This helped to boost the Solvency II coverage ratio to around 175 per cent, comfortably ahead of the 130-160 per cent target range. On the downside, low bond yields meant that net investment income fell again (see table). This is a worrying trend that has seen such income drop by more than a third since 2012: investors will be hoping that a recent uptick in yields is just the start.
Analysts at Panmure Gordon are forecasting net tangible assets for the year to December 2017 of 344p a share (from 281p a year earlier).
| RSA INSURANCE (RSA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 610.5p | MARKET VALUE: | £6.22bn | |
| TOUCH: | 610-611p | 12-MONTH HIGH: | 618p | LOW: 391p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 139 | |
| NET ASSET VALUE: | 377p** | COMBINED RATIO: | 94.2% | |
| Year to 31 Dec | Gross premiums (£bn) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2012* | 9.40 | 327 | 534 | 32.5 |
| 2013 | 9.10 | -203 | 504 | 10.2 |
| 2014 | 7.30 | 53 | 471 | 2 |
| 2015 | 6.86 | 106 | 381 | 10.5 |
| 2016 | 7.22 | 101 | 347 | 16 |
| % change | +5 | -5 | -9 | +52 |
Ex-div: 2 Mar Payment: 12 May *EPS and dividend adjusted for three-for-eight rights issue and five-for-one share consolidation **Including intangible assets of £728m, or 71p a share | ||||
