Strong pound leaves insurer RSA struggling

Jessica Morris
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Hester has been enacting a turnaround plan (Source: Getty)

The figures

Insurance company RSA said today that net written premiums rose one per cent year-on-year in the first quarter of 2015. RSA revealed it took about £1.5bn of premium income in the three months to March and expects to deliver about £380m of investment income in 2015.

Why it's interesting

Today's results show the recovery plan put in place by chief executive Stephen Hester is starting to take effect. Nonetheless, RSA is facing challenges from the strength of the pound.

RSA said premium income was lifted by a series of disposals, including those in Singapore as well as Hong Kong, which is part of the recovery plan.

It had uncovered an accounting scandal in Ireland resulting in several senior members of staff leaving the company, and it also suffered a series of profit warnings.

The firm is still struggling with "lower interest rates and currency moves in our key territories continue to have adverse impacts, whilst insurance markets remain competitive".

And it warned that "the path to high quality outperformance will not be smooth or easy, but our focus on that goal is clear".

Now RSA will look towards annual meeting on Friday where Hester could be facing a revolt over his pay package, which includes provisions for a bonus payment of up to 230 per cent of his £950,000 salary.

What RSA said

Stephen Hester, chief executive of RSA, said:

RSA made encouraging progress in [the first quarter]. Premium income returned to modest growth. Costs are falling as planned. Disposals were completed in Asia and others were contracted in India and for UK Engineering Inspection.

Operating profit and underwriting performance were up on [on the first quarter of 2014] though variable across different parts of the Group as can be expected in any single quarter. In particular our UK business results are gaining strength.

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.

In short

While RSA's turnaround plan is starting to take effect it is facing headwinds due to the strength of the sterling.

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