Richard Gamble, Royal's chief executive, appears to have done a good job returning the group to health. But for all the talk of getting back to the core skills of underwriting and financial and expense control, much of the improvement stems from that oldest and simplest of insurance skills: imposing huge rises in premiums. Mild UK weather has helped, too. Shareholders might have liked to see more evidence of how Mr Gamble's team copes with a steadily growing business before they give Royal the capital to step on the accelerator again.
Premiums have risen enormously over the past couple of years, but by the end of this year, insurers may see the return of fierce competition. This may mean Royal has chosen the ideal time to raise new money; the question is whether it is such a great opportunity for shareholders. After all, the rights price of 255p is more than twice last year's low.
All the same, the new money will repair some of the damage to Royal's balance sheet, thereby limiting the downside risk. So, on balance, shareholders should take up their entitlements.
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