RSA gets brief reprieve

RSA's turnaround remains on track. Premium incomes returned to growth during the first quarter, costs fell, and the insurer completed some disposals. Profits, especially in the UK, were good, too. Low interest rates, a strong pound and fierce competition are, however, creating a short-to-medium-term drag here.

Core group net written premiums rose 1% at constant exchange rates to £1.5 billion, and underlying trends were in line with expectations across all regions. Scandinavia grew by 6%, Latin America by 10% and the UK by 3%, even after stripping out one-off benefits. That offset weakness, thought to be temporary, in Canada. At actual exchange rates, however, quarterly premium income fell 6% year-on-year.

Net attributable profit was "a little ahead of plan," though, flattered by £109 million proceeds from the sale of both the Hong Kong and Singapore insurance businesses in March. Higher profits increased tangible net asset value (TNAV) by 3% - £81 million or 8p per share - between December and March to 294p, slightly better than expected.

Encouragingly, pricing was up 3% across the book and solvency metrics were slightly up versus year end, in line with forecasts.

"Our near-term ambition is to have substantially completed the strategic focus and capital elements of our restructuring plan as we go into next year; to deliver improved underlying results in 2015 and to be making good progress towards our medium term performance targets," said Stephen Hester.

The former Royal Bank of Scotland chief, who within weeks of taking charge last year announced a £747 million rights issue, added: "The path to high quality outperformance will not be smooth or easy, but our focus on that goal is clear."

Up almost 3% at one stage early Thursday, RSA shares still languish near their lowest in a decade. However, they currently trade on about 15 times forward earnings and 1.4 times reported net asset value (NAV). "RSA is progressing well on both restructuring and operational parts," says JP Morgan. It is, but that rating looks generous enough given competition and FX headwinds, despite the obvious benefits to come from Hester's turnaround strategy. And there's only a modest dividend following previous cuts.

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