RSA swings into profit, targets more cost-cutting

By Carolyn Cohn LONDON (Reuters) - Insurance company RSA swung into profit in 2014 under the stewardship of former Royal Bank of Scotland boss Stephen Hester but announced further cost-cutting and the departure of its chief financial officer. The firm, best known for its More Than home and motor insurance brand, has been trying to turn itself around after posting losses in 2013 following a series of weather-related claims and an accounting scandal at its Irish unit. Hester, who joined a year ago after the resignation of former CEO Simon Lee, set out plans last year to raise up to 1.6 billion pounds ($2.5 billion) in capital, tapping shareholders for nearly half and making up the rest from disposals and money saved by scrapping the dividend. RSA is battling a competitive insurance market and low government bond yields which are hitting investment returns. "The impact of lower interest rates and exchange rate moves hurts insurance companies and hurts us," Hester told Reuters on Thursday. "The insurance market is probably ... a more price-sensitive place than a year ago." RSA posted a pre-tax profit of 275 million pounds, it said in a trading statement, compared with a 244 million pound loss a year earlier. The results came in slightly below the 299 million pounds forecast in a poll of analysts supplied by the company. The insurer said it would restart dividend payments with a modest 2 pence final dividend, well below a forecast of 6.25 pence. RSA's shares, which have been underperforming broader European insurance stocks <.SXIP> this year, dropped more than 3 percent before trimming some losses to stand 2.5 percent lower at 439 pence at 8:50 a.m. Eamonn Flanagan at Shore Capital reiterated his "hold" recommendation on the stock, however, saying "there appears to be light at the end of the tunnel". Cost-saving targets were raised to an annualised 210 million pounds by 2016 from a previous 180 million, with a new target of more than 250 million pounds by 2017. Hester said some of the cuts would fall on the firm's London head office, already due to shed 30 percent of staff under the existing restructuring programme. The UK was likely to be hit more severely than the company's Canadian operation, he added, but declined to give further details. RSA has raised 800 million pounds in disposals so far, but its Middle East, Russia and UK legacy businesses remain on the list for possible sale. Chief Financial Officer Richard Houghton would step down from the board on May 7, leaving the firm this year once a successor is recruited, RSA said in a separate statement. Hester said relations were good between himself and Houghton, adding "there is no hidden story here". ($1 = 0.6440 pounds) (Reporting by Carolyn Cohn; editing by Sinead Cruise and Ruth Pitchford)