RSA Insurance Group plc (LON:RSA): Is Now The Time To Bet On Financials?

RSA Insurance Group plc (LSE:RSA), a UK£6.60B mid-cap, is an insurance company operating in an industry, which has recently experienced the impact of a softening commercial lines market, a problematic personal lines segment, and a low-yield investment climate. Agility has become the new normal as insurance companies are confronted by a marketplace that is continuously changing drastically. Financial services analysts are forecasting for the entire industry, a somewhat weaker growth of 2.79% in the upcoming year , and a massive growth of 35.18% over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the UK stock market as a whole. Should your portfolio be overweight in the insurance sector at the moment? Below, I will examine the sector growth prospects, as well as evaluate whether RSA Insurance Group is lagging or leading its competitors in the industry. Check out our latest analysis for RSA Insurance Group

What’s the catalyst for RSA Insurance Group's sector growth?

Amid challenges from regulatory disruption, increasing consumer expectations and sluggish sales, insurers will increasingly consider technology integration to drive growth and efficiency. In the previous year, the industry saw growth in the twenties, beating the UK market growth of 14.66%. RSA Insurance Group leads the pack with its impressive earnings growth of over 100% last year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with RSA Insurance Group poised to deliver a 89.93% growth over the next couple of years compared to the industry's 2.79%. This growth may make RSA Insurance Group a more expensive stock relative to its peers.

Is RSA Insurance Group and the sector relatively cheap?

Insurance companies are typically trading at a PE of 15.58x, relatively similar to the rest of the UK stock market PE of 16.73x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 13.35% on equities compared to the market’s 12.18%. On the stock-level, RSA Insurance Group is trading at a higher PE ratio of 24.84x, making it more expensive than the average insurance stock. In terms of returns, RSA Insurance Group generated 7.85% in the past year, which is 5.50% below the insurance sector.

Next Steps:

RSA Insurance Group’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If RSA Insurance Group has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other insurance companies. However, before you make a decision on the stock, I suggest you look at RSA Insurance Group's fundamentals in order to build a holistic investment thesis.

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has RSA's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of RSA Insurance Group? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.