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RSA back on the dividend list

RSA Insurance has resumed dividend payments, but problems remain.
February 27, 2015

Shares in RSA Insurance (RSA) slid on the release of its full-year figures, despite a return to the dividend list. RSA turned in net profits of £76m last year, against a loss of £338m in 2013. Profitability was held in check by £405m in one-off charges, including a £99m writedown of goodwill and intangibles and £73m in redundancy costs.

IC TIP: Sell at 442p

Net written premiums contracted by 8 per cent to £7.5bn, largely as a result of the disposal and rationalisation strategy pursued by chief executive and corporate rescue specialist Stephen Hester, who joined last year from RBS. The strategy was designed to strengthen RSA's balance sheet through the disposal of non-core businesses.

The group has generated around £800m in disposals since Mr Hester's review, with asset sales in Canada, Thailand, Poland and the Baltic states and agreements struck for further deals in China and Hong Kong. However, the gains on disposals were undermined by a hefty underwriting loss from RSA's Irish business, as work continued to turn it around in the wake of a fraud scandal.

RSA's finances were also bolstered by a £773m rights issue in April, followed by a fourth-quarter bond issue. The company has also cut "controllable costs" by 6 per cent.

Broker JPMorgan Cazenove expects year-end tangible book value of 307p (from 286p in 2014).

RSA INSURANCE (RSA)
ORD PRICE:442pMARKET VALUE:£4.5bn
TOUCH:442-443p12M HIGH / LOW:501p410p
DIVIDEND YIELD:0.5%PE RATIO:1
NET ASSET VALUE:377p*COMBINED RATIO:99.4%

Year to 31 DecGross premiums (£bn)Pre-tax profit (£m)Investment return (£m)Dividend per share (p)
2011 †8.1613.0745.040.7
2012 †9.4327.0534.032.5
2013 (restated)9.1-203.0504.010.2
20148.360.0521.02.0
% change-9-+3-80

Ex-div: 5 Mar

Payment: 15 May

*Includes intangible assets of £800m, or 79p a share.

† Historic EPS and dividend adjusted for 3-for-8 rights issue and 5-for-1 share consolidation.