What’s Telling Me To Buy RSA Insurance Group Plc Today

Royston Wild considers the investment case for RSA Insurance Group plc (LON: RSA).

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Today, I am looking at RSA Insurance Group (LSE: RSA) (NASDAQOTH: RSANY.US), and assessing whether to add the insurance giant to my personal stocks portfolio.

Business abroad continues to lead the way

RSA has seen net written premiums tick steadily higher in recent rimes as its emphasis on delivering a pan-global strategy continues to reap dividends. The company announced earlier this month that these rose 7% in January-June, on a constant currencies basis, to £4.65bn.

While its core UK and Western Europe markets saw net written premiums tick 3.4% higher to £1.95bn, its aggressive drive into new regions — spearheaded by strategic acquisitions over the past year or so — is helping to drive overall business higher.

Net written premiums in emerging markets advanced 17.4% to £686m in the first half, while Canadian business rose 16.6% to £866m. And premiums in Scandinavia increased to £1.18bn, a 5.8% rise. And I fully expect activity in these areas to keep moving skywards, supplemented by additional M&A activity — RSA said recently that it hopes to grow ‘both organically and through selective bolt-on acquisitions.’

Steady earnings growth expected to roll higher

Indeed, the consensus is for RSA to report explosive earnings growth in the coming years. According to City analysts, the company is due to print earnings per share growth of 21% this year, to 12p, with a further 9% advance expected in 2014 to 13p.

A heavy earnings dip last year prompted the insurance giant to rebase the dividend, a move which saw the full-year payout drop to 7.31p per share from 9.16p in 2012. And London number crunchers expect this to fall again in 2013, to 6.4p, before bouncing modestly higher in 2014 to 6.48p.

Still, dividends for this year and next still carry healthy yields of 5.3%, even if another dividend cut does materialise this year. This compares extremely favourably with the average prospective reading of 4.6% for its non-life insurance rivals, as well as the FTSE 100’s forward yield of 3.2%.

A stock market star offering Foolish value for money

And I believe that RSA offers outstanding bang for your buck at current price levels. The insurance specialist was recently dealing on a P/E ratio of 10.5 and 9.7 for 2013 and 2014 respectively — a reading around or below 10 is exceptional value. And a price/earnings to growth (PEG) readout of 0.5 and 1.1 for this year and next also illustrates its relative cheapness, camped around the value benchmark of 1.

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> Royston does not own shares in RSA Insurance Group.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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