ii view: Underwriting profit boosts RSA shares
A repositioning of its underwriting business is aiding profits. Investors have taken note.
7th November 2019 10:29
by Keith Bowman from interactive investor
A repositioning of its underwriting business is aiding profits. Investors have taken note.
Third-quarter trading update to end September 2019
- Group net written premiums flat at £4.87 billion
- Operating profit for the first nine months was up
- Underwriting profit strongly up
Chief executive Stephen Hester said:
"RSA's results to end September are strong, and consistent with our plans for the period. Current year underwriting results have sharply improved, with all our regional businesses contributing. There is lots more to do - not least to finish 2019 well, with momentum into next year."
ii round-up:
UK, Scandinavian and Canadian focused insurance company RSA Insurance (LSE:RSA) reported a positive third-quarter trading update.
The statement, which was light on numbers, flagged a strong improvement in profits for its underwriting business.
RSA, whose brands include MORE TH>N in the UK and Trygg-Hansa in Sweden, has been busy removing itself from unfavourable lines at its London-based international commercial underwriting business.
Intense competition in the underwriting arena has resulted in falling prices with many insurers scaling back their operations.
Canadian premiums rose by 4% driven by price increases and volume growth in direct personal lines, although UK & International premium income fell by 3% reflecting the impact of pricing and actions taken at its underwriting business year to date.
The share price rose by over 4% in early UK stock market trading.
ii view:
A history dating back over 300 years, property and casualty insurance company RSA has amassed over nine million customers.
RSA remains in a period of transformation. Insurance market conditions are competitive and financial markets are volatile. Losses and challenges in its commercial business have been hindering performance. Partial business exits and a review of this part of the insurer have been occupying management, with its efforts now appearing to bear fruit.
For investors, a prospective dividend yield of more than 4.5% offers appeal, with the estimated forward price/earnings (PE) ratio currently sat beneath the three-year average. Management is grappling with current group issues and ongoing patience is likely to be required, but signs of success appear to be emerging.
Positives:
- Management action to improve performance
- Attractive dividend payment (not guaranteed)
Negatives:
- Insurance market conditions remain competitive
- Dividend cover of 1.6 times earnings down from a three-year average of 2.1 times
The average rating of stock market analysts:
Buy
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