LONDON (Reuters) - Bad weather and weakness in specialist commercial lines caused a 19 percent drop in British insurer RSA’s full-year operating profit, sending its shares down on Thursday.
Insurers globally have suffered from two years of heavy losses after natural catastrophes such as storms, hurricanes and typhoons, while premium increases across a range of insurance classes have been capped by strong competition.
“We had subsidence in the summer in the UK, the “Beast from the East” in the winter in the UK, Canada had lots of weather losses,” CEO Stephen Hester told a media call after the group’s results. Overall, 2018 was “the fourth worst year globally for things like hurricanes, which is part of the international losses,” he said.
Hester said changes to the business would help to ensure a “bounce back” for the group in 2019, but the group’s shares fell more than 3 percent, one of the worst performers in the FTSE 100 index.
The insurer, best known in Britain for its More Than brand, warned last year about poor performance in its London-based international commercial insurance business and pulled out of several lines, including international freight and construction.
It put former finance head Scott Egan in charge of the UK and international business earlier this month and said on Thursday its London market business was undergoing a strategic review “to identify any further portfolio exits”.
Operating profit for the year ending Dec. 31, 2018 fell 19 percent to 517 million pounds, below the 561 million pounds forecast in a company-supplied poll.
Underlying profit fell 33 percent to 250 million pounds and underlying return on tangible equity dropped to 12.6 percent from 15.5, below the company’s 13-17 percent target range.
Panmure analysts described the RSA results as “even worse than we had expected”, though they maintained their “hold” rating on the stock.
Rivals Lloyd’s of London insurer Hiscox reported a beat on pre-tax profit on Monday, while motor insurer Hastings on Thursday also saw a rise in pre-tax profit
RSA’s shares were down 3.3 percent at 509.6 pence at 0912 GMT.
The insurer said it would pay a total dividend of 21 pence per share, up 7 percent and in line with forecasts.
Reporting by Carolyn Cohn; editing by Simon Jessop and Susan Fenton