LIVERPOOL insurance group RSA unveiled a “solid” performance for 2012 today with a 5% growth in premiums to £8.35bn, although pre-tax profits fell from £613m to £479m, and operating profits fell from £727m to £684m.
COR, or the combined operating ratio which shows claims and expenses as a percentage of premium income where anything below 100% means a profit, was 95.4%.
The underwriting result was flat at £375m, which included the negative impact from adverse weather in the UK and Italian earthquakes in the first half of the year.
The UK arm was also affected by large losses in its marine underwriting business through the capsizing of the Costa Concordia and Superstorm Sandy in the US, leading toa profit of £12m compared with £23m.
However, the business, which employs 1,200 staff in Liverpool, reports continued growth in premiums as it expands in its emerging markets, Canada and its global specialty lines.
And it anticipates a stronger COR performance of better than 95% in the medium term.
The board also announced a recommendation today to rebase its dividend payment to shareholders at 3.9p per share, compared with 5.82p in 2011.
Group chief executive Simon Lee, said today: “These are a solid set of results demonstrating strong progress in challenging market conditions.
“We’ve seen good growth in premiums up 5% 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.
“We are continuing to execute our 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 have leading market positions in Scandinavia, Canada, Latin America, Ireland and the UK. These are attractive general insurance markets where we are either already delivering or will deliver strong returns on capital. Where we do not see a route to achieve target returns on capital we will take decisive action.”
And he added: “The board’s decision to rebase the dividend is a prudent move that will enable us to invest in the opportunities we see for growth and is in the best interests of our shareholders.
“It is absolutely the right thing to do for the business given the prospect of prolonged low bond yields. The new dividend is appropriate for the business today, sustainable into the future and will allow a progressive dividend policy going forward.”
However, Liverpool stockbroker Panmure Gordon downgraded its recommendation on RSA’s stock from ‘hold’ to ‘sell’ on news of the dividend downgrade.
Analyst Barrie Cornes said: “Disappointingly, RSA has cut its dividend and says that it needs to do so in order to grow the business.
“While the 2012 results were in line with expectations, the 33% cut in the final dividend together with guidance for a similar cut in the 2013 interim in our view removes a key prop to the share price.
“We downgrade our recommendation to sell from hold and lower our target price to 120p per share.”