Wet weather dampens RSA operating profit, cuts dividend

Extreme wet weather in the UK, combined with earthquakes in Italy, contributed to a 5.9 per cent fall in RSA Insurance group's operating result for the full year 2012.

The company's operating result fell to £684m in the 12 months of 2012 compared to £727m in the preceding 12 months. The underwriting result was flat at £375m including the negative impact from adverse weather in the UK. Pre-tax profit fell 22% to £479m from £613m a year earlier.

Investment income fell to £515m from £579m, ahead of 2012 guidance.

However, net written premiums rose 5.0% on a constant exchange rate basis to £8,353m and the balance sheet showed an economic capital surplus of £1.2bn at 99.5% calibration.

Going forward, the company said it expected to achieve a 10-to-12% return on equity in 2013.

Simon Lee, Group Chief Executive of RSA, commented: "These are a solid set of results demonstrating strong progress in challenging market conditions. We've seen good growth in premiums up 5.0% to £8.4bn. Operating profits of £684m have been impacted by the Italian earthquakes, extreme wet weather in the UK in the first half of the year and falling bond yields."

He also said the group continued to execute its strategy of global growth while maintaining profitability and underwriting quality.

"In 2012 over 65% of our premiums were from outside the UK and as we move more of the business towards higher growth and higher margin markets, we are optimistic about our future growth prospects.

"We are confident that we can deliver sustainable and ongoing improvements in the combined ratio and return on equity through management actions and we are not dependent on economic or market recovery to deliver these plans."

Dividend rebasedDespite all of the above the company has announced that it is to re-base its dividend so as to reflect "prospects of prolonged low bond yield environment."

Thus, the company has declared a final dividend of 3.9p per share versus the 5.82p paid out last year and the Board anticipates a similar percentage reduction in the 2013 interim dividend.

Lastly,RSA explained that the re-basing creates a sustainable dividend and will allow for a progressive dividend policy for the future consistent with the anticipated underlying growth in earnings.MF