RSA share price ticks up with strong second quarter

Jake Cordell
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RSA chief executive Stephen Hester used to head up the Royal Bank of Scotland (RBS)
RSA chief executive Stephen Hester used to head up the Royal Bank of Scotland (RBS) (Source: Getty)

Insurers RSA claim they are on course for another bumper year after posting a big jump in operating profits and hiking its dividend in the first six months of the year, sending the shares up 2.7 per cent at the open.

The figures

Pre-tax profits came in at £148m for the first half of the year. This was down by nearly half from £288m in the same period in 2015, although the figures are skewed by one-off gains from disposals last year.

On an underlying basis, the group's operating profit climbed 20 per cent to £312m, with the UK and Scandinavia providing the bulk of the insurer's income.

The growth came despite payouts due to weather-related claims being "worse than planned", with £35m being dished out due to flooding across the UK and Europe in June and another £39m after the Alberta wildfire in Canada.

The interim dividend was set at 5p per ordinary share, up from 3.5p last year.

Why it's interesting

In terms of its share price, RSA has gone practically nowhere in the last two and a half years. On 1 January 2014 they opened at 460p a pop, and they closed yesterday at 498p - having rarely sunk lower than 400p or popped higher than 500p.

Such stability is a rare beast on the stock markets, so when chief executive Stephen Hester warns in the report today "we will have setbacks", they are probably the kind of setbacks most other firms would be envious of. With underlying profits growing handsomely, RSA were quick to herald their own strong performance in an otherwise tough external environment.

That tough environment is set to get tougher should the Bank of England cut interest rates today, RSA said, as it tried to assess the impact the UK's vote the leave the EU will have on the firm.

The insurers said: "RSA is insulated from Brexit impacts via non-sterling profits and separate regulated European subsidiaries. However, the impacts on interest rates are negative for insurers generally and uncertainties remain in other dimensions."

What RSA said

Stephen Hester, RSA group chief executive, said:

We are delighted with RSA’s progress towards our demanding ’best in class’ ambitions. In tough, competitive insurance markets and with significant financial market volatility, our results are even more satisfying.

Less than six months after raising market expectations materially, we are in the fortunate position of beating consensus again. We are doing this the ‘right’ way, focusing on high quality sustainable improvements - to customer capabilities and service, to underwriting loss ratios and to cost.

Our advances are being achieved in the face of market headwinds to premiums and pricing as well as investment income.

On the potential effect of the UK's referendum, the group said: "The impact of Brexit will take time to play out. But RSA is well placed, with a majority of earnings in foreign currencies."

In short

RSA keeps ticking over and insists Brexit won't hold it back.

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