Solid set of results despite flooding
Royal & SunAlliance received a thumbs up from analysts and the City with the publication of its interim results this week.
Reporting results that were better than analysts had expected, the share price jumped 5p on Wednesday to 141p, continuing the climb that began earlier in the week when the share started to rise from 131.2p.
The insurer’s pre-tax operating profits of £403m comfortably beat analysts’ consensus expectations of £353m. The underwriting result of £144m was also ahead of predictions, with analysts’ forecasting £115m.
R&SA announced an additional £70m in cost savings, taking its target to £200m. This would include 700 job cuts, including 500 in the UK.
Numis said: “The group sounds confident of being able to sustain current profitability, no doubt helped by further potential cost savings. In addition there are signs that the bottom of the UK cycle may be nearing with commercial rate decreases abating in the first half of 2007.”
It added: “R&SA’s operating performance is proving better than expected as reserve releases and cost savings mitigate the impact of rate reductions. We expect the shares to move to a higher rating to reflect stable profit before tax and upside potential from a turn in the cycle.”
Investor service Hargreaves Lansdown highlighted “prudent underwriting and continued cost cutting” had mitigated the impact of the floods.
Merrill Lynch described the results as “solid”.
At the time of writing, R&SA’s shares were trading at 133.1p.
