However, the company's shares fell early Thursday after it said it will make dividends grow more modestly to reflect currently low yields from investment markets. At 1000 GMT, RSA shares were down 3.6% at 109 pence, making it the worst performer among FTSE100 stocks. Meanwhile, the FTSE100 index was up 0.3%.
Operating profit for 2011 was GBP884 million, up from GBP641 million in 2010. The result was higher than the GBP840 million average expected by 10 analysts, according to FactSet.
"We have delivered a good result in difficult conditions given record natural catastrophe losses for the industry, the challenging economic environment and historically low yields," said new Chief Executive Officer Simon Lee, who took over from Andy Haste at the start of the year.
"Looking forward, we expect the market environment to remain tough. However, the last few years have demonstrated the resilience of the business in even the most challenging conditions. With these foundations and our clear strategy, we remain confident of continuing to drive strong results," Lee said.
Its three key markets--international, U.K. and emerging markets--all posted increases in net written premiums.
Net profit was GBP426 million, 23% higher than the GBP346 million posted a year earlier.
Net written premiums rose 9% to GBP8.14 billion from GBP7.46 billion in 2010.
RSA doesn't give precise figures for catastrophe and weather-related losses, but said these losses in 2011 were GBP100 million worse than they expected. In 2010, these losses were GBP255 million worse than expected.
The company is recommending a full-year dividend of 9.16 pence a share, up only 4% from 8.82 pence a share previously. This shows a slower dividend growth compared to the 7% annual growth seen in recent years.
Lee said it is prudent to have slower dividend growth in the current environment. "When the economic environment changes, then we hope to grow the dividend more quickly," he told reporters.
Panmure Gordon analyst Barrie Cornes said the full year dividend was disappointing. "Looking further out, the guidance is for more modest increases, which we think will be taken poorly by the market," he said. Cornes kept his hold rating on RSA but lowered his target price to 110 pence from 120 pence.
Oriel Securities analyst Marcus Barnard said RSA's results were boosted part by GBP157 million worth of net investment gains. "Given low interest rates, this is not likely to be seen as an ongoing level of gains," Barnard said, keeping his hold rating and price target of 110 pence on the stock.
Lee told Dow Jones Newswires recently that he is keeping overseas expansion as one of his top priorities, and said the current financial crisis could create opportunities for RSA to buy smaller financial services firms.
"We're still looking for sensible bolt-on acquisitions but we've got to be judicious in this type of environment," he said.
"Maybe this current environment will shake loose some assets as well. People may be looking to dispose assets which they would no longer want to keep. So long as it's a sensible deal at a sensible price, we'll be prepared to look at it," Lee said.
He said RSA currently aims to generate 70% of premiums from outside the U.K. by end-2015, even without new acquisitions, though this may also be achieved as early as 2014.
RSA's combined operating ratio improved 94.9% from 96.4% in 2010, helped by the company's ability to raise premiums.
A combined ratio is a measure of claims against premiums. A figure below 100% indicates an underwriting profit, and a lower number indicates higher profitability.
RSA maintained a strong capital position, with an end-December capital surplus of GBP1.3 billion, down from GBP1.5 billion at end-2010.
RSA also said it has appointed Richard Houghton as Group Chief Financial Officer, replacing George Culmer, who will leave after RSA's annual general meeting in May. Culmer will join Lloyds Banking Group PLC (LYG).
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