February 22, 2018 / 7:37 AM / a month ago

UPDATE 2-RSA's Hester sees higher shareholder payouts after 2017 profit beat

* FY operating profit 663 mln stg vs forecast 639 mln

* Combined operating ratio 94 pct, UK division 100.5 pct

* Final dividend 13 pence, total dividend 19.6 pence (Releads, adds CEO comment, detail, share price, analyst)

By Carolyn Cohn

LONDON, Feb 22 (Reuters) - Even higher payouts for RSA shareholders are likely in 2018, chief executive Stephen Hester said on Thursday after the company posted an above-forecast 2017 operating profit and boosted its dividend by 23 percent.

Analysts had been looking for a special dividend or share buyback from the insurer, best known in Britain for its More Than brand, following improving results under the stewardship of Hester, a former boss of RBS.

The firm said it would pay a total dividend in 2017 of 19.6 pence, up 23 percent from a year earlier. Its shares rose more than 2 percent.

“At the end of 2018, we should have scope to increase dividends not just by the amount that our profits increase but by some further amount,” Hester told a media call.

RSA saw strong performance in its Canadian and Scandinavian divisions, contributing to a 1 percent rise in operating profit to 663 million pounds ($920.2 million), above a company-supplied consensus forecast of 639 million pounds.

But performance was weaker in its UK and international division, in part due to losses of 72 million pounds from hurricanes in the United States and Caribbean, and Mexican earthquakes.

Insurers worldwide have been hit by record losses of around $135 billion for natural disasters in 2017. However, insurance rates have risen following the fires, floods, hurricanes and earthquakes, suggesting higher profits in 2018.

RSA’s overall combined operating ratio, a measure of underwriting profitability, was 94 percent against 94.2 percent a year earlier, beating a forecast 94.1 percent. A level below 100 percent indicates a profit.

Combined operating ratio for the firm’s UK and international division was 100.5 percent.

The company has been a subject of takeover speculation after rival Zurich Insurance walked away from a bid in 2015, though some market players say its higher share price makes RSA a less attractive target now.

“We don’t need a deal - if someone were to approach us we’d do the right thing for shareholders,” Hester said.

RSA shares jumped 2.3 percent to a six-week high of 627 pence at 0830 GMT, making it the second best performer in the FTSE 100 index.

Analysts at Bernstein said the UK segment had disappointed, but RSA seemed focused on turning it around. They reiterated their “market perform” rating. ($1 = 0.7205 pounds) (Reporting by Carolyn Cohn; editing by Simon Jessop/Keith Weir)

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