FTSE 100 insurer RSA Insurance (RSA) shrugs off a weak performance for its UK business as a strong international showing helps deliver a beat on 2017 profit.
WHAT IS GOOD
The shares are up 3% to 631.6p as operating profit hits £663m, up a modest 1% but ahead of consensus forecasts for a drop to £639m.
The star performers are its Canadian and Scandinavian operations. Its business in Canada delivers an especially impressive combined ratio of 83%. The combined ratio is a key measure of how effective an insurance firm is at underwriting risk.
A ratio above 100% means it is paying out more in claims than it receives in premiums - anything below implies the opposite. The ratio for the group as a whole came in to 94% from 94.2% a year earlier.
WHAT IS NOT SO GOOD
The ratio for the UK arm, beset by increasing household claims and a slowdown in its motor insurance business, comes in at 104.3%.
Shore Capital analyst Eamonn Flanagan is concerned by a 5% decline in net tangible asset value (NTAV).
Insurers are often valued against this metric and Flanagan, who has a ‘sell recommendation on the stock, says: ‘Management, admirably led by Stephen Hester, has done a great job in delivering a more resilient underlying performance...it is just that the shares have raced way too aggressively forward ahead of actual NTAV delivery.’
