RSA Insurance full year profits up 25%; raises cost cuts target again

RSA Insurance reported a 25% jump in full year operating profits to £655m as it lifted its annualised cost savings target for the third time to more than £400m from £350m.

Net written premiums fell to £6.41bn from £6.83bn in 2015.

RSA chief executive Stephen Hester said markets would remain competitive.

“Our priority is to maintain underwriting discipline. Nevertheless, we hope to report premium growth overall. We target further attritional loss ratio improvements, albeit at a moderated pace, together with further reductions in controllable costs,” he said.

“Costs from weather/large losses are inherently volatile though bounded by reinsurance protection at levels largely unchanged from 2016.”
Hester said investment income was expected to be £300m for 2017 assuming current market implied rates, with discount unwind in the range of £30m – £35m.

“Financial market volatility remains a risk factor,” he said.

RSA added that it lifted its target for return on tangible equity to 13-17% from a 12-15% and was aiming to perform in the upper part that range.

A final dividend of 11p a share was declared, making a total dividend of 16p, a rise of 52%.

Analysts at RBC Capital Markets were positive on the results but wanted to see a better yield than 2.7% on the stock, which they felt were "well below" that of sector peers.

"For us to become more positive, we would need RSA's yield to increase whether that is via a higher dividend payout or special dividends. Potentially when underlying earnings and actual earnings converge in 2018, this could materialise," RBC said in a note.

"Finally, the company has made excellent progress on an underlying basis, but will the pricing environment allow them to keep showing underwriting improvements in the near term?"

RSA shares were up 5.8% to 610p at 1156 GMT.