Hester’s turnaround plan puts RSA firmly back into profit

Insurer RSA (LON:RSA) delivered strong results on Wednesday, outperforming expectations despite a drop in net written premiums.

Figures

Group operating profit rose by 25 per cent to £655 million, up from £523 million the previous year. Analysts polled had been expecting an operating profit of £626 million.

Underlying pre-tax profit rose to £556 million from £417 million, with underlying earnings per share rising 42 per cent to 39.5p.

Despite the strong figures, net written premiums dipped slightly to £6.4 billion from £6.8 billion. However, underwriting profit grew to £392 million from £245 million.

RSA also raised its target for return on tangible equity to 13-17 percent, above their previous range of between 12-15 percent.

Stephen Hester, RSA Group Chief Executive, commented:

“In 2016 RSA took major strides forward, moving seamlessly from ‘successful turnaround’ to organic outperformance. Our improvements are both strategic and operational. They are delivering high quality sustainable results.

“Our ambition now is to drive RSA’s performance towards ‘best in class’ levels. Industry and financial market conditions will remain tough. We plan to outperform through continuing self-help measures on customer service, underwriting and costs.”

What it means

The stronger figures show that CEO Stephen Hester’s turnaround programme, which began with Hester’s hire in 2013, may be beginning to have an effect.

RSA confirmed that its cost-reduction programme was ahead of original targets, and that it would aim to save more than first anticipated. The group moved its target for the third time to over £400 million of gross annualised savings by 2018, from a previous target of more than £350 million.

Investors reacted positively to the results, sending shares in RSA up 4.42 percent to 602.50 (0939GMT).