RSA Insurance Group PLC (LON:RSA) saw its shares lifted on Thursday after the FTSE 100 firm reported a rise in both net premiums and profits in its first quarter.
In a trading update, the group said net written premiums in the period had risen 3% on the prior year to around £1.57bn, while on an adjusted basis, which accounts for planned exits, FX movements and reinsurance changes, net premiums were “broadly flat” in line with plans for the period.
READ: RSA shares gain as UBS turns positive on the stock after 2018 results
Premium growth in the group’s Scandinavian and Canadian divisions, which were up 3% and 8% respectively, offset a 5% decline in premium income from its UK arm, although RSA stressed that this was “broadly in line” with its plans and reflected the impact of pricing and underwriting actions in 2018 and 2019 to date.
The numbers were slightly ahead of estimates from analysts at UBS, who had previously predicted net premium growth of 1%.
Meanwhile, the firm’s operating profits were higher in the period and in line on a reported basis, with an improved combined ratio and slightly lower investment income as forecast.
Weather costs in the period were 3.2% of net earned premiums, 1.9 percentage points lower year-on-year as “significantly higher” costs from Canada were offset by lower costs in the UK and International divisions.
The company added that while insurance market conditions had remained “largely unchanged” in the quarter compared to 2018, the financial markets had produced “some headwinds”, with a reduction in bond yields and credit spread as well as a stronger sterling and a weaker Swedish krona impacting performance.
Stephen Hester, RSA’s chief executive, said that the group’s results were “in line with our demanding plans for the period”, with its “extensive underwriting actions” on track to respond to what he said was “challenges” from 2018.
“We remain focused on delivering positively for customers and shareholders in 2019."
RSA is currently in the middle of a restructuring after a disappointing set of 2018 results, which saw its underwriting profit fall for the first time since 2013 as bad weather and losses in its London Market specialty and wholesale business cut into earnings.
READ: RSA underlying profits drop on higher weather costs, London Market losses
In a note, analysts at broker Shore Capital said the results were “broadly in line” with their expectations, although noted that the headwinds from the financial markets were “not helpful for the ongoing turnaround of the business”.
Shore currently has RSA at a ‘hold’ rating with a target price of 534p.
2019 “getting off to a good start”, says analyst
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said that the fact that RSA had managed to “keep premiums, combined operating ratios and operating profits steady or growing during a cyclical squeeze for the general insurance market” was “testament” to its leadership and a “geographically diversified model that’s able to smooth lumps and bumps of individual markets”.
“The relative benign start to the year, compared to the Beast from the East last year, was a welcome boost but also totally outside the group’s control. General insurers are always hostages to fortune to some extent, but good cost control is a more replicable positive. After a challenging 2018, it looks like this year is getting off to a good start.”
In mid-morning trading, the shares were up 2.2% at 546.2p.
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