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RSA reinvents itself though premium growth remains sluggish

RSA Insurance is only now coming to the end of a major restructuring.
February 26, 2016

RSA Insurance (RSA) has now reached the final part of a root and branch restructuring. The group's operations now centre on the UK, Scandinavia and Canada, with around two-thirds of premiums written outside the UK. The scale of the restructuring can be appreciated when you consider that 12 overseas operations have been sold off since June 2014, leaving only the group's Latin American operation held for sale.

445.6p

With a much more focused operation, RSA has increased its gross cost savings target to over £350m by 2018, and is raising the underlying return on tangible equity to the upper half of its 12-15 per cent target range. Group operating profits last year rose from £365m to £523m thanks to a very strong underwriting performance that saw profits increase from £41m to £220m. The numbers were boosted by a £91m release from prior years' reserves, and despite larger than expected weather-related losses (bad weather in December alone cost £76m), the combined ratio (claims as a percentage of premium income) improved from 99.5 to 96.9 per cent. However, there is still plenty to work on. Premium income was down in both Canada and Ireland, while low bond yields trimmed the investment return, which has virtually halved since 2011.

Analysts at Numis are forecasting net tangible book value at December 2016 of 307p.

 

RSA INSURANCE (RSA)
ORD PRICE:445.6pMARKET VALUE:£4.53bn
TOUCH:445.4-445.7p12-MONTH HIGH:528pLOW: 371p
DIVIDEND YIELD:2.4%PE RATIO:65
NET ASSET VALUE:358p**COMBINED RATIO:96.9%

Year to 31 DecGross premiums (£bn)Pre-tax profit (£m)Investment return (£m)Dividend per share (p)
2011*8.161374540.7
2012*9.432753432.5
20139.1-20350410.2
20147.3534712
20156.910638110.5
% change-6+100-19+425

Ex-div: 3 Mar

Payment: 13 May

*Historic EPS and dividend adjusted for 3-for-8 rights issue and 5-for-1 share consolidation **Including intangible assets of £616m, or 61p a share