RSA beats forecasts and lifts 2008 profitability target

By Jonathan Cable and Clara Ferreira-Marques

LONDON (Reuters) - RSA Insurance Group (RSA.L) beat forecasts with a 9 percent rise in first-half profit and said it expected to surpass a key profitability target for the year, lifting its shares to a three-month high.

The group also said on Thursday it sees signs of improvement in its core UK market, helping send its shares up 1.7 percent to 141-1/2 pence by 9:46 a.m.. They rose as high as 142.7p, their highest since early May.

RSA's operating result reached 440 million pounds, against 403 million a year ago, when earnings across the industry were hit by claims from heavy floods in Britain.

Six analysts polled by Reuters had on average forecast an operating result of 422 million pounds.

Following more bullish comments from UK rivals Aviva (AV.L) and Admiral (ADML.L) last week, Chief Executive Andy Haste said he saw a "slightly more encouraging picture" for the UK market, but warned stiff competition remained.

"We are now seeing more people (raise rates)," he told reporters. "In commercial there is still some behaviour we don't understand, but we are seeing less of that and we are having some success winning back accounts which we lost on price."

The group said it expected to improve on the target for its combined ratio -- costs and claims as a percentage of premiums and a key measure of underwriting profitability -- of 95 percent for the year as a whole. In the first half this ratio was 93 percent, already better than the full-year objective.

RSA posted a 24 percent jump in its underwriting result and net written premiums rose 12 percent to 3.4 billion pounds, again above estimates -- helped by strength in Canada and Scandinavia, currency benefits in emerging markets and a stable position in Britain, where RSA said the market remained tough.