The Investment Column: US weighs on Royal & SunAlliance

The reshaped Royal & SunAlliance insurance group has bounced back with better-than-expected profits, a general stabilisation of premium rates and plans to scale down its troubled US business.

The reshaped Royal & SunAlliance insurance group has bounced back with better-than-expected profits, a general stabilisation of premium rates and plans to scale down its troubled US business.

After a rough few years for shareholders, things are looking up for the pure general insurer. In a major restructuring of its business, RSA has cut thousands of jobs, slashed expenses and last July sold its life insurance division to focus on general insurance. It operates in the commercial and personal insurance markets across the UK and Scandinavia, its core portfolios, as well as in the US.

The group is slowly withdrawing from the US where it has been dogged by uncertainty over the total cost of compensation claims for asbestosis from the workers of some manufacturing companies it insured. Under Andy Haste, who took over as chief executive in April 2003, RSA stopped writing most new business in the US but has had to set aside big reserves to meet possible future claims there. Last year RSA raised US claims reserves by £160m after a £495m hit in 2003. It announced yesterday it would sell its US motors division, its last ongoing operation where it writes new business, which will improve the tight capital position in the US.

The group's annual operating profits jumped to £456m from £140m in 2003, and performance steadily improved over the year. Profitability also rose, with the ongoing business combined ratio strengthening to 94 per cent from 96.8 per cent in 2003. But the US operations continue to be a drag, with an operating loss of £424m last year.

RSA is seeing a general plateauing of premium rates on the commercial book, but continuing pricing pressure. RSA is delivering better results but big risks remain. At 84p, the shares are a hold.

Book your place with T&F Informa

T&f Informa, the business created last year through the merger of the science publisher Taylor & Francis and the business publisher Informa, is already looking like an impressive performer.

The company delivered 2004 results ahead of forecasts and sounded pretty positive on the current year. Analysts believe the more aggressive approach of Informa will be applied to the T&F business, especially now that the executive chairman, David Smith, who came from the science side,will step down.

The merger process went smoothly, producing £9m of cost savings and £9m of revenue synergies. Integration is now largely over.

The company delivered a 31 per cent profit increase in 2004, while there was organic revenue growth in all divisions. One of the attractions of this media company is the reliability and visibility of earnings. Just 6 per cent of group revenues come from advertising. Subscriptions to its publications make up 43 per cent of sales - renewal rates here are 95 per cent.

Academic library budgets are also improving, which is good news for T&F's journals and books businesses - although the company never suffered as much as its rival Reed Elsevier from the squeeze on academic spending.

The conferences business, which provides a quarter of turnover, has already staged its biggest show for the current year: the mobile phone industry's 3GSm event, which went well. At 424.5p, the shares are a buy.

Kaye clan provides a risky nibble

Is the Kaye family's appetite insatiable? The clan has long dominated the quoted restaurant sector, with one edible initiative or another. So it was hardly surprising that months after selling their Ask Central pizza chain, they chose to gobble up a large stake in another restaurant operator.

The target was Gourmet Holdings, the old Maddisons coffee shop chain. The group kicked its cappuccino habit in favour of running gastropubs. On top of the handful of Richoux restaurants it owned, it now has six pub-restaurants that go by the name of Bel and the Dragon.

It will spend the next six months sprucing up all its sites, which should put it in good stead to improve on yesterday's interim results. On a pre-tax level, the profits fell to £313,000 from £1m, although at an operating level they doubled to £570,000. The group has pledged to double its Bel and the Dragon sites and should have enough cash to do so.

At 13.75p, up 0.25p, the shares trade on a heady 43 times p/e. But if you share the Kayes' taste for risk, they could be worth a nibble.