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RSA Insurance skips dividend but aims to 'catch up' on missed payments later

Published: 09:37 30 Jul 2020 BST

RSA Insurance Group -

RSA Insurance Group PLC (LON:RSA) said it is still holding fire on its dividend as while underlying first half profits increased, the effect of the coronavirus pandemic hit investment income and statutory profits.

Net premiums of £3.1bn written in the first half were down 3% on a year ago, accelerating the decline from the first quarter, with the pandemic having led to £110mln reduction through price reductions, refunds, coverage changes and impacts on specific business line volumes.

Claims frequency in the second quarter for non COVID-19 issues was down in a wide range of 15-60%, with frequencies increasing in June as lockdowns eased.

A statutory profit before tax of £211mln was down 7% due to COVID-19 market related impacts.

Underlying profit before tax was up 14% at £332mln, ahead of the consensus forecast of £237mln, as underwriting profit rose 33% to a record £240mln but investment income was down 13% to £134m due to pandemic impacts.

The group combined ratio was 92.2%, down from 94.3% a year ago.

Chief executive Stephen Hester said: “COVID-19 impacts on operating profits were broadly neutral in H1, though related financial market charges reduced our statutory results.

“Each region of RSA contributed in line or better than our plans, driven by improved attritional loss ratios.”

On the dividend, the board said it expects to resume payments as soon as felt prudent, “which absent unforeseen events should be by the time of full year results” and added that the aim is to “catch up on missed dividend payments over time”.

The shares fell 3% to 425.2p on Thursday morning.

Analysts at broker Shore Capital said earnings were well ahead of expectations as the impact of COVID-19 was neutral as lower claims frequency offset lower premiums, investment impacts and higher expenses, plus more conservative reserving. 

On the dividend, the analysts added: “The company’s solvency ratio of 158% is after accruing for both the full year 2019 dividend and a normal interim dividend of 2020, which we believe is a clear signal of its intention and ability to pay.”

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