Share Name Share Symbol Market Type Share ISIN Share Description
Rsa Insurance Group Ld LSE:RSA London Ordinary Share GB00BKKMKR23 ORD GBP1.00
  0.00 0.0% 684.20 684.20 684.40 - 0.00 01:00:00
Nonlife Insurance 6,546.0 483.0 30.9 22.1 7,079

Rsa Insurance Group Ld Share Discussion Threads

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RSA Insurance Group has performed a significant restructuring program following some fundamental issues a few years ago, streamlining its business, improved its operating performance and balance sheet. Additionally, RSA continues to reach or exceed its financial targets, which bode well for its future prospects. As restructuring is almost completed, RSA’s investment case should move towards income due to its very good dividend growth prospects. It has potential to become a high-dividend yield stock in the next few months, which may also lead to a re-rating of its shares. Geographically, the company has a diversified exposure, with operations in more than 20 countries. However, it is largely focused on the U.K. and some international Northern developed markets. The U.K. segment, including both commercial and personal products, account for 41% of RSA’s premiums, while other important markets are Scandinavia (27% of premiums) and Canada (23%). RSA is now considerably exposed to general insurance markets, which are relatively mature, consolidated and quite stable. This means that, generally speaking, these markets have good returns despite moderate economic growth because established players are usually more focused on profitability rather than volume. This is a recognition that pursuing aggressive growth initiatives in mature markets would likely lead to pricing wars, which ultimately result on lower profitability for the industry as a whole. Taking this into account, RSA targets growth mainly through improved business service and efficiency, such as initiatives to improve customer service and retention, as well as enhance its customer acquisition capabilities. Financially, it targets further underwriting improvement and cost reductions to reach higher earnings in the next few years. Its three core geographies should continue to generate the vast majority of its earnings, with the U.K. and Scandinavia targeted to represent about 80% of its profitability in the coming years. RSA’s recent strong growth is justified mainly by its operating performance, but currency gains were also positive due to the weakening British pound following the Brexit vote. Given that about 70% of RSA’s operating profit is generated outside of the U.K., a weaker currency is positive for its earnings generated abroad. Its return on tangible equity [RoTE] based on underlying earnings was 14.2%, a very good level of profitability and within its new target range of 13-17%, which was achieved one year earlier than expected and upgraded upwards (from RoTE target of 12-15% previously). RSA expects that 2017 should be much less affected by special items and be the last year of material one-off costs, which means that is adjusted and reported earnings should converge in the next couple of years and the difference should be irrelevant thereafter. During the first quarter of the year, RSA only released a ‘trading update’, which confirmed a robust performance, with key indicators continuing to show progress in its business fundamentals. Its net premiums were up by 4% at constant currency rates, being driven by the U.K. (+7% year-on-year) and Canada (+6% yoy), and its operating profit was ahead of its expectations. Going forward, RSA expected to achieve premium growth in the coming years, despite competitive markets across its core businesses. Its priority is to maintain underwriting discipline, which bodes well for its operating earnings sustainability. RSA’s current Solvency II ratio was 158% at the end of 2016, at the top of its target range of 130-160%. Its capitalization has been boosted by good profit generation, but also from balance sheet de-risking due to its disposals. The sale of its U.K. legacy liabilities improved the quality of its capital even further and represented a small boost to its Solvency II ratio, which the company used to buy back debt with high coupon rates. At the end of March 2017, its Solvency II ratio was 166%, which is in-line with its competitors, closing one of its main weak points over the past few years that was its relatively undercapitalization compared to peers. This marks another milestone on its restructuring path, leaving RSA as a properly capitalized insurance company. Additionally, its surplus capital position compared to its regulatory requirement of a Solvency II ratio above 100%, means that RSA doesn’t have regulatory constraints to distribute excess cash to shareholders and should be able to offer an attractive shareholder remuneration policy in the next few years. Based on underlying earnings, its dividend payout ratio was conservative in the past year, given that RSA distributed only 41% of earnings. Its dividend policy is for a payout between 40-50%, plus ‘special’; dividends on a discretionary basis. This seems conservative given that its peers Admiral and Direct Line distribute close to 100% of its earnings to shareholders, showing that RSA has a lot of room to distribute more cash to shareholders. Indeed, according to analysts’ estimates, RSA should deliver solid dividend growth at about 25% per year in the next three years. Its dividend is expected to be about £0.31 ($0.40) per share by 2019, almost double compared to its most recent annual dividend. Despite its good dividend growth expectations, RSA’s dividend payout ratio is expected to increase only to about 55% during the next three years, a level that seems conservative given the company’s strong capitalization and low need to retain earnings. Conclusion: RSA has undergone a significant restructuring of its business over the past few years, which is now almost completed. The company is now in a much more solid position, from an operating and balance sheet standpoint boding well for its growth prospects. Therefore, its investment case should change in the next few months, from a self-help story to an income stock. RSA has very good dividend growth prospects, assuming its conservative payout policy, with plenty of upside to beat expectations due to its good fundamentals and strong capitalization. RSA currently trades at 1.84x book value, representing a valuation discount to its closest peers, which trade on average at about 2.50x book value. This valuation seems to be unwarranted because it reflects more its past performance rather than its improving fundamentals and prospects of becoming a high-dividend yielder in the next couple of years. RSA is currently expected to distribute about 55% of its earnings to shareholders during the next three years, but the company can easily beat these estimates. If RSA becomes a little more aggressive and decides to increase its payout to 70%, which is sustainable given that it doesn’t need to retain earnings going forward, this would lead to a dividend yield of about 5.5%. This would be above the yield of its peer group and possibly would be a positive catalyst for a re-rating of its shares. If RSA’s valuation moves closer to its peers’ average, it has more than 30% upside potential in the next 12-18 months, making it quite attractive from an income perspective and potential capital gains as well.
HSBC today reaffirms its buy investment rating on RSA Insurance Group PLC (LON:RSA) and raised its price target to 715p.
I am glad I exercised patience and believed in Hestor. I wouldn't say I am making a mint, but I am comfortably in profit. :-)
Still making a mint on this one.
Georgina Hamilton, who jointly runs Polar Capital UK Value Opportunities fund, has revealed why she thinks RSA shares are ‘good value’, despite the shares having performed particularly well. The fund manager commented that Hester, ‘has done a great job of turning the company’s performance around. The market had a lot of faith in Hester, so the shares raced ahead, before the progress had really been made, and were not value then. But the progress is happening, the returns from the company have justified the valuation, and returns are still improving and so the shares trade on a good valuation on that basis. The turnaround was done well, he sold the divisions he should have been selling, and maybe the stock has been forgotten about a little. It is certainly an interesting investment. There is a lot of visibility about where the earnings will come from in the future, which is something we like, and the balance sheet is strong.’
JP Morgan Cazenove today has raised its price target on RSA Insurance to 630p (from 585p) while Goldman Sachs raised its price target to 685p (from 665p). With the good progress made in the first three months of the year, together with confident management stated "key proof points for further progress coming through positively", Beaufort reiterates its Buy rating on the Shares. The shares are valued at FY2017E and FY2018E P/E multiples of 14.4x and 12.4x and dividend yields of 3.3% and 4.6%, respectively. The insurer also managed to reduce its interest bill by around £60m each year. Hester said this equated to giving investors a boost 6p per share. He added: "Last year we made 39p a share, so it’s quite material.”
Making a mint here so far.
Barrie Cornes, an analyst at Panmure Gordon exercised caution about this morning's further jump in the share price. He said: We like what Stephen Hester is doing at RSA... but, in our view, this good news is now all in the share price.
Final Dividend 11p. Ex.....02 March Paid...12 May
Well I sold at 600, we shall see if that was wise or not in about 9 days!
"We expect the additional capital released to be used to pay down expensive debt thus increasing earnings per share in the future and [thus] improving the dividend story," This is obviously encouraging, but if I read the release correctly, didnt they pay almost £1B to offload this, so does that suggest the upcoming FY results might not look that good, with the benefit coming over the next year or so. Im contemplating selling, and buying back post results.
So expect 10% + rise in earnings then based on currency.
Analyst Barrie Cornes at Panmure Gordon said the deal was good news for shareholders "as it removes a book of 'nasties' and has a positive impact on financials". "We expect the additional capital released to be used to pay down expensive debt thus increasing earnings per share in the future and [thus] improving the dividend story," he added. RSA said it has benefitted from the drop in the fall in the value of the pound by some 16% since the June Brexit vote, and expected a boost in operating earnings for the tax year. Over two-thirds of the company's profits are generated overseas.
Market seems to like the latest deal.
Canaccord Genuity today reaffirms its hold investment rating on RSA Insurance Group (LON:RSA) and raised its price target to 600p (from 475p).
I've taken the opportunity to sell today. To have made a 10% profit before dividends on this near disastrous investment is a wonderful result. Too marginal a business to warrant investment long-term. Good luck to those that remain.
UBS downgraded the insurer to Sell from Neutral, arguing it will be hard for RSA to surprise to the upside given its shares are near a five-year high. The Swiss bank also sees challenges for RSA in 2017 on the pace of its UK turnaround plans and said the need for RSA to trim its debt pile will mean any special payouts are unlikely to materialise any earlier than 2018.
Legacy specialist Catalina is in pole position to acquire RSA's £600mn ($750mn) UK legacy book as the sale process draws towards a close. Sources said that following the submission of final bids Catalina is the likeliest acquirer of the business, with both Armour Holdings and Enstar set to come in as underbidders.
By Robert Stephens - 2017 could be the year that dividend growth becomes the most important aspect of income investing. In 2016 and recent years, low levels of inflation have meant that investors focused on higher yielding stocks. While this was enough when inflation has been at or near zero, a faster rising price level could mean that the market favours fast growing dividends over high yields. For companies which are stifled by high payout ratios, lacklustre earnings growth and large interest repayments stemming from high debt levels, this could be a problem. Their dividend growth may be unable to keep pace with inflation and their share prices could suffer. However, for companies such as RSA Insurance (LON:RSA), a renewed focus by investors on dividend growth could be a fillip. It is due to raise dividends per share by over 40% in 2017. It should also benefit from continued improvements in its operating performance and a low valuation over the next year. 2017’s fastest growing dividend stock? Due to the potential for companies with fast-growing dividends to perform well in 2017, RSA Insurance has appeal. It only yields 2.6% today, but it is due to raise dividends by 40.3% in 2017. This could make it one of the fastest growing dividend stocks in the UK index, and it is being paid for out of a mix of a slightly higher payout ratio and improving operating performance. RSA is forecast to increase its payout ratio by 1% next year, which will put it at 48% versus 47% for 2016. Therefore, in spite of such a large planned increase in dividends, there is still the prospect of a higher payout ratio to boost payouts over the medium term. In fact, the company is targeting a payout ratio of up to 50% plus special dividends over the medium term. The bulk of the 40%+ forecast rise in dividends next year will be from improved financial performance as RSA gradually continues to benefit from a sound strategy. Operating improvements: In terms of RSA’s operational improvements, it has completed a large disposal programme. This has totalled around £1.2 billion, taken two years to complete and left a more appealing core business. The ‘new’ RSA has a superior risk/reward ratio than the ‘old’ RSA and should position the company for better performance in the long run. It has also cut costs and is on target to deliver £350 million in cost savings by 2018. This has taken place alongside a deleveraging process. For example, in the first half of the current year around £200 million of subordinated debt was retired. In spite of these improvements, RSA has a relatively low valuation. Its P/E ratio of 17.8 is due to drop to 13 next year. Given the company’s positive outlook, I feel this is fair. Further evidence of an appealing valuation is evidenced by its prospective yield for 2017 of 3.7%. Outlook: Given the risks facing the global economy, 2017 is a challenging year to forecast. However, higher inflation seems likely and this could cause income investors to pivot away from high yielding, slow dividend growth stocks and towards lower yields from stocks which have superior dividend growth potential. The risk of negative real income growth could spur this change. Since uncertainty from Brexit in particular is likely to rise, sterling could weaken and the pound could depreciate further. Therefore, inflation may overshoot The Bank of England’s current target. In such a climate, RSA has appeal. Its yield may be low today, but rapid growth in 2017 and the potential for further growth in 2018 mean that it could become more popular among income investors. Its operational improvements mean that its business is now lower risk and offers potentially higher rewards than in recent years, which bodes well for the long term. Trading at a fair price and with an upbeat outlook, the search for dividend growth leads to RSA in my view.
Barclays Capital today reaffirms its overweight investment rating on RSA Insurance Group PLC (LON:RSA) and raised its price target to 597p (from 572p) The disposal of £600mn ($754mn) of RSA's UK legacy exposures could increase the likelihood of special dividends from the insurer, according to Keefe, Bruyette & Woods analyst Greig Paterson.
Goldman Sachs 12/12 Resumes Buy 635.00p
The disposal of £600mn ($764mn) of RSA's legacy UK exposures has gone down to the wire, with parties now in the final stages of the bidding process, The Insurance Insider understands. Final bidders are believed to include Catalina, Enstar and Armour.
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