Articles - RSA delivers strong growth but dividends cut to 3.90p

 Solid performance, 5% growth in net written premiums

 ♦ Net written premiums up 5% on constant exchange rate basis to £8,353m
 ♦ Underwriting result flat at £375m (2011: £375m) including negative impact from UK adverse weather and Italian earthquakes in first half; combined operating ratio of 95.4% (2011: 94.9%)
 ♦ Investment income of £515m (2011: £579m), ahead of 2012 guidance
 ♦ Emerging Markets now represents 10% of insurance result
 ♦ Acquisitions in Canada and Argentina completed
 ♦ Operating profit of £684m (2011: £727m); Return on equity of 9.1% (2011: 11.5%)

 Balance Sheet remains strong with healthy capital surplus

 ♦ IGD surplus of £1.2bn; covering capital requirement 1.9 times
 ♦ Economic capital surplus of £1.2bn at 99.5% calibration
 ♦ Net asset value per share excluding pension deficit of 107p (2011: 108p)

 Strategy is delivering – expecting to achieve 10-12% ROE in 2013

 ♦ Continued growth in premiums as business expands in Emerging Markets, Canada and Global Specialty Lines
 ♦ Further improvements to combined ratio anticipated as reshaping in UK, remediation in Italy and operating leverage in Emerging Markets deliver
 ♦ Expect to deliver strong premium growth, a COR of better than 95%, around £470m of investment income and return on equity of between 10 and 12% in 2013
 ♦ Confident in prospects for further improvements to ROE and COR in medium term

 Recommendation to rebase dividend. Final dividend of 3.90p per share

 ♦ Reflects prospects of prolonged low bond yield environment
 ♦ Creates sustainable dividend and progressive dividend policy for the future consistent with the anticipated underlying growth in earnings
 ♦ Final dividend of 3.90p per share (2011: 5.82p). Board anticipates similar percentage reduction in 2013 interim dividend

 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% 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 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.

 “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.

 “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.” 

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