Short-term punters reverse their policy on Royal and Sun Alliance

Picking winners in the market when the threat of double-dip recession looms is proving extremely difficult. A year ago, there was a view among several investment shrewdies that general insurance stocks – as opposed to life insurers – offered an excellent short-term opportunity. The idea was that, at a time when the banks were sucking up all the spare cash the world had to offer, there would be less capital chasing premiums for car, household and commercial insurance. Well-­capitalised insurers, ran the theory, would be free to hike their rates and thereby enjoy a rare opportunity to make a lot of money very quickly. It hasn't quite worked out that way. There was nothing to complain about in RSA's figures today – "a strong performance," said chief executive Andy Haste, accurately – but neither was there much evidence of the hoped-for bonanza. Net written premiums were up 4% – good, but not spectacular. What appears to have happened during the recession, especially in the UK, is that small and medium-sized companies have cut back on cover. Insurance is a must-buy in many cases but not all. It's a question of affordability. The likes of RSA have indeed enjoyed a boost (albeit modest) to their pricing power but they haven't reaped a windfall in terms of the pure volume of business. The conclusion is that investors should probably stop thinking of insurance stocks as short-term punts. RSA has definite attractions – like a yield of 6.4% on a dividend up 7% – but instant gratification tends not to be one.