US Edition RSA Insurance
128.9p -1.3
Questor says BUY
Although trading at a higher rating than some other insurance groups, the dividend yield – at 6.7pc – is still very attractive for income seekers.
Group net written premiums over the nine months rose 10pc to £5.531bn, representing a slight acceleration from the interim stage, which saw the figure rise 9pc. Management expects UK growth for the full year to be in line with the 10pc level reported at the nine-month stage.
The group also confirmed that it expected to have a combined operating ratio (COR) of 95pc for the full year – in line with previous guidance.
The COR is an important measure for insurers, as it is a measure of premiums coming into the company minus insurance claims paid out. Any reading that comes in below 100pc means the company is taking in more premiums than it is paying out in claims – hence it is profitable.
Earlier this year, the company failed to buy Aviva's UK general insurance arm, which implies that management is keen to do a deal to expand in size. There is a risk that a deal could emerge that will need a rights issue, so investors need to keep this in mind.
The group is trying to increase its share of its main markets, including the UK, Europe, Canada and South America.
The background remains challenging, but RSA continues to drive rate increases through its operations.
RSA's shares are trading on a December 2010 earnings multiple of 9.3 times, falling to 8.5 next year.
The shares were first recommended on June 18 at 117.6p and they have risen 10pc, compared with a market up 11pc. Investors who bought on the recommendation would have locked in a 7.3pc yield, but the shares are still yielding 6.7pc. Buy for the income.