February 27, 2020 / 7:37 AM / a month ago

Insurer RSA sees little impact from coronavirus as profit rises

LONDON (Reuters) - The coronavirus epidemic is likely to have little impact on British insurer RSA’s (RSA.L) business, Chief Executive Stephen Hester said on Thursday, as the company’s shares rose on a forecast-beating 2019 operating profit.

Governments ramped up measures on Thursday to battle a the virus as the number of infections outside China, the source of the outbreak, for the first time surpassed those appearing inside the country.

Insurance stocks are among those which have fallen on concern about the hit to their business.

Home, motor and commercial insurer RSA, best known in Britain for its “More Than” brand, also has major businesses in Canada, Ireland and Scandinavia.

Hester said claims related to the virus had been “negligible” as the company did not do much business in the countries most affected.

Other European insurers such as Zurich (ZURN.S) and Hiscox (HSX.L) have also said they see little impact so far.

Hester said flooding in Britain would likely have a negative impact on RSA’s UK business in the first quarter but the scope of the damage appeared less severe than for previous floods in 2015.

RSA posted an above-forecast operating profit of 656 million pounds ($852.41 million), helped by a strong underwriting performance and a restructuring of its international commercial business. Operating profit, excluding exits, was forecast at 644 million pounds, according to a company-supplied consensus poll.

RSA has pulled out of several lines in its commercial insurance business, including international freight and construction. It said on Thursday it had nearly completed the programme to cut unprofitable business, though results in Canada and Denmark “remained poor”.

RSA posted a group underwriting profit of 405 million pounds and a combined ratio of 93.6% - a key measure of underwriting profitability - both in line with forecasts.

RSA's shares rose 1.8% to 542 pence per share at 0853 GMT, one of the top performers in the FTSE 100 .FTSE.

Panmure Gordon analyst Barrie Cornes said RSA’s shares had been under recent pressure due to coronavirus worries but remained overvalued, reiterating his “sell” rating on the stock.

RSA said it would pay a total dividend of 23.1 pence per share, a rise of 10% and compared with a forecast 22.8 pence.

Editing by Sinead Cruise and Jane Merriman

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