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21 Reasons That May Make RSA Insurance Group plc A Buy

Today I am explaining why I believe RSA Insurance Group (LSE: RSA) (NASDAQOTH: RSANY.US) is a great growth stock at a stunning price.

Earnings explosion looks on the cards

In my opinion RSA Insurance’s surging progress across all of its major markets, aided by shrewd M&A activity in recent years across Latin America and Canada, makes it a great candidate for stunning earnings growth. Indeed, City analysts expect earnings per share to rattle comfortably higher over the medium term, and predict a 21% improvement in the current year alone.

Forecasters remain hugely optimistic over the insurer’s prospects despite a worrying return on equity (RoE) admission made in last week’s interims. RSA announced that it is expecting RoE to be below 10%, caused by poor weather conditions in Europe and Canada, news of which drove shares 6% lower on the day of the results.

Still, I believe that recent weakness presents a fresh buying opportunity for an exciting growth story. Indeed, the interims revealed that the company continues to generate tonnes of new business, and the firm saw net written premiums across the group rise 7% to £6.7bn during January-September.

While business rose 3% in its core UK and Western Europe markets, to £2.84bn, premiums in red-hot emerging markets surged 17% to £1.03bn, a promising omen for future growth. Indeed, RSA noted that Asia, the Middle East, as well as Central and Eastern Europe all performed well during the period. Elsewhere, net written premiums in major market Canada rose 14% to £1.34bn in January-September.

And following RSA’s predicted 21% earnings per share improvement this year, to 11.5p, the City’s number crunchers anticipate an additional 11% increase in 2014 to 12.8p. And these spectacular earnings projections provide the company with a price to earnings to growth (PEG) multiple of 0.5 and 0.8 for 2013 and 2014 respectively, well below the watermark of 1 that represents exceptional bang for your buck.

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In addition to the firm's bubbly earnings prospects, RSA Insurance is a big draw owing to the above-average dividend yields on offer. The business elected to rebase its dividend earlier this year, and City analysts expect full-year dividends this year and next to come in below last year's 7.31p per share payout.

Still, the company still boasts yields of 5% and 5.1% for 2013 and 2014 respectively, comfortably beating the 4.5% average for its rivals in the non-life insurance sector. But whether or not the insurance giant provides you with a compelling investment case, you should check out this brand new and exclusive report that singles out even more FTSE 100 winners to really jump start your investment income.

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> Royston does not own shares in RSA Insurance Group.