Leading RSA investors back Hester turnround plan

Leading investors in RSA have signalled they are prepared to give Stephen Hester time to turn around the insurer as its chief executive on Thursday provided tentative signs of progress.

In first-quarter results published ahead of its annual meeting on Friday - where Mr Hester, the former Royal Bank of Scotland chief, faces a potential rebellion over his pay package - RSA indicated that persistent pressure on premium income was relenting.

The trading update pushed shares in the general insurer 2.8 per cent higher to 430p on Thursday, although they are still down more than 30 per cent from highs reached in February 2011.

Hired to revive RSA after a series of profit warnings, Mr Hester has laid down plans for disposals, cost cuts and operational improvements since he took the helm more than a year ago.

However, highly competitive markets for the insurer - which takes on risks ranging from pet injuries to disruption at wind farms - have undermined his efforts.

On Thursday, RSA disclosed it had written £1.5bn premiums in the period after paying for reinsurance - a year-on-year drop of 8 per cent.

The premium income was pushed lower by the strong pound and a series of asset sales that Mr Hester has undertaken to shore up the insurer's balance sheet.

However, the decline was less steep than some analysts expected. Assuming currencies had been constant, and ignoring businesses that have been sold or deemed "non-core", premiums ticked up 1 per cent.

A fund manager at one of RSA's largest 20 investors said: "He took over this company when it was in very bad shape and he is doing the right things to turn it round. There is still a way to go, but I have faith in Mr Hester."

Another top 20 investor added: "He has got disposals under way and is on course, although the UK market is clearly a concern. But it is tough in the insurance market at the moment."

Ahead of the AGM, the Investment Management Association, whose members oversee more than £5tn of assets, has issued an "amber top" warning over RSA's executive pay. However, it was not clear on Thursday how many investors would vote down the remuneration plan.

Mr Hester said RSA had made "encouraging progress" during the first quarter, highlighting that lower interest rates - which are denting the insurer's investment income - and foreign exchange movements had weighed on the group's performance.

The group said pricing had held up well in Scandinavia, where its Codan and Trygg-Hansa businesses make its among the region's largest insurers, but was "mixed" in Canada, where it is the country's third biggest general underwriter.

RSA also cautioned that "pricing conditions remain soft across all major lines" in the UK, where the group sells cover under the More Than brand.

Still, premium income from the UK motor business rose 14 per cent as the group sold more cover based on telematics - technology that monitors motorists' behaviour and offers cheaper policies to those who drive responsibly.

Premium income also rose 8 per cent at its pet insurance business, as the company put prices up to cover higher claims costs.

RSA did not disclose a quarterly earnings figures, but said profits were "in line" with its expectations.

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