Barclays view




"RSA Insurance got a boost on Tuesday as Barclays upgraded the stock to ‘overweight’ from ‘equalweight’ and lifted the price target to 545p from 457p.

Barclays said RSA’s full-year 2015 underlying results were “very strong”, beating company collected underlying earnings per share consensus by 20%.

Most impressive was the speed at which the loss ratio has started to improve, the bank said.

It noted RSA’s plans to close the gap to the best in class players in each of its core markets, UK, Scandinavia and Canada by 2018.

“While we acknowledge that it is rare for a mid of the pack insurer to become a ‘best in class’ insurer, we do believe RSA has set out a realistic plan to get there,” it said.

RSA is aiming to have a combined ratio of 94% or lower in the UK and Canada, and 85% or below in Scandinavia.

Barclays reckons there is significant upside even if the company is only partially successful, and its new price target is based on RSA getting halfway to its targets. The bank’s base case assumes RSA gets halfway to its targets, with 2018 earnings per share of 48p and a combined ratio of 92.8%."

RSA up 17p today to 476p (vs 545p target).