25th Feb 2016 11:26
LONDON (Alliance News) - RSA Insurance Group PLC shares shot higher on Thursday after the group delivered a 43% rise in operating profit for 2015 and hiked its dividend significantly after reinstating payouts in the wake of a significant restructuring of the business.
RSA shares were up 12% to 440.30 pence on Wednesday, the best performer in the FTSE 100.
Operating profit before tax rose to GBP523.0 million in 2015, the insurer said, up from GBP365.0 million at actual exchange rates and from GBP334.0 million at constant currency. The operating profit was significantly ahead of analyst consensus estimates provided by the company, which had forecast GBP481.0 million.
Thanks to the robust results, RSA pushed its its final dividend payout up to 7.0 pence per share from only 2.0p a year earlier, meaning its full-year dividend rose to 10.5 pence. The previous year, the 2.0p final dividend had been the only payout.
Dividends had been suspended by RSA in the wake of an accounting scandal in Ireland and a subsequent restructuring undertaken by Stephen Hester, the former Royal Bank of Scotland Group PLC boss who was recruited in 2014 to return RSA to health.
On Thursday, Hester increased the group's annual gross cost savings target to more than GBP350.0 million by 2018. Against its target of greater than GBP250 million annual gross cost reduction by 2017, the insurer delivered GBP180 million at the end of 2015 and now expects to achieve in the region of GBP250 million by 2016.
The group said it has made good progress on improving its operational performance, including through initiatives focused on customer service and underwriting results, plus investments in technology. Group controllable costs were down 8.0% year-on-year, in constant currencies, while core business controllable costs fell 3.0%.
"RSA is now a strong and focused international insurer with leadership positions in the UK, Scandinavia and Canada. The group's strategic restructuring will complete in 2016 as remaining contracted disposals close," Hester said.
"We see 2016 as the last major restructuring year with disposals and balance sheet work completing and the heavy lifting of core business improvement and cost reduction action continuing. We expect challenging markets and to rely on self-help to progress. Despite these headwinds we face the future with determination and confidence," Hester added.
Annual net written premiums for the core group, excluding discontinued and non-core operations, amounted to GBP5.72 billion in 2015, down from GBP6.09 billion at actual currency rates and slightly lower than the GBP5.75 billion constant currency comparative.
Underwriting profit increased to GBP220.0 million, compared to only GBP41.0 million a year earlier, with strong underlying results from operations in Scandinavia, Canada and the UK, including a record performance in Canada.
In addition, the insurer lifted its expectations for underlying return on tangible equity to the "upper half" of its 12-15% target range by 2017, with further improvements to follow.
By Sam Unsted; [email protected]; @SamUAtAlliance and Samuel Agini; [email protected]; @samuelagini
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