A diminished investment return, partly reflecting lower yields on cash, helps explain the pre-tax profit fall in RSA's first-half results. Although with a 93.5 per cent combined ratio (of claims to premiums), the group remains solidly profitable at the underwriting level.
In fact, premium rate rises look fairly healthy across the group's operations. The UK commercial motor account, for example, saw rates rise 9 per cent in the period, while the UK personal motor book delivered a 5 per cent rate rise. And the Canadian personal household account pushed through an 8 per cent rate increase, with 4 per cent rate increase being registered in both the Scandinavian and UK segments of that book. The UK commercial property book looks in good shape, too, with rates there up 6 per cent.
That said, chief executive Andy Haste anticipates tough conditions in the second half, with the full-year combined ratio expected to deteriorate slightly, to around 95 per cent. Still, despite weaker investment earnings, the investment book remains prudently invested, with 90 per cent of the portfolio in cash and safe-looking bonds.
Numis Securities expects full-year adjusted pre-tax profit of £603m (£759m in 2008), giving EPS of 14.4p (15.9p).
RSA INSURANCE (RSA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 129p | MARKET VALUE: | £4.3bn | |
| TOUCH: | 128-129p | 12-MONTH HIGH: | 173p | LOW: 110p |
| DIVIDEND YIELD: | 6.1% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 104p* | COMBINED RATIO: | 93.5% | |
| Half-year to 30 Jun | Net premiums (£bn) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 3.36 | 395 | 355 | 2.73 |
| 2009 | 3.49 | 301 | 311 | 2.92 |
| % change | +4 | -24 | -12 | +7 |
Ex-div: 12 Aug Payment: 27 Nov *Includes intangible assets of £854m, or 25p a share | ||||
