RSA increases interim dividend by 43 percent

LONDON (Reuters) - British insurer RSA on Thursday reported record first-half underwriting profits of 119 million pounds and raised its interim dividend by more than 40 percent.

RSA has undergone a turnaround under ex-Royal Bank of Scotland boss Stephen Hester, who has streamlined the business to focus on markets in Britain, Ireland, Scandinavia and Canada.

Pre-tax profit for the six months to June 30 came in at 148 million pounds, RSA said in a statement. This was ahead of a company-supplied consensus forecast for 131 million pounds and down from 288 million pounds in the first half of 2015 which was boosted by disposal gains.

RSA's shares were up 2.8 percent by 0723 GMT.

The company maintained its medium-term return on equity of 12-15 percent. In the first half, this figure, which is a measure of profitability, was 12.8 percent.

RSA is still targeting an ordinary dividend payout ratio of 40-50 percent with the possibility of additional payouts. It also announced an interim dividend of 5 pence per ordinary share, a 43 percent increase.

In a call with reporters, Hester said he was especially pleased with the earnings in an environment of sluggish economic growth and low interest rates.

"Our programme is all about self-help as opposed to receiving external help," he said. "That makes it even more satisfying that we've been able to produce the progress that you can see from our half-year results."

Like many financial services companies, RSA has targeted cost cuts to compensate for the tough trading environment and the company said it was on track to deliver in excess of 350 million pounds in gross annualised savings by 2018.

Hester said Britain's vote in June to quit the European Union raised challenges and uncertainties for RSA, but that it had so far been a net positive for RSA thanks to a weakening of sterling, which has boosted the value of earnings abroad.

(Reporting by Joshua Franklin. Editing by Jane Merriman)