Investors today dumped RSA Insurance shares after the company cut its dividend for the first time in 10 years.
The FTSE 100 insurer, best known for its More Than brand, blamed falling investment income as its shares tumbled by 13%. The company said its final dividend would be 3.9p this year, 33% lower than a year ago.
RSA is traditionally one of the best dividend payers on the London Stock Exchange, with its shares yielding about 7% before today’s announcement.
Chief executive Simon Lee said the cut was necessary because low bond yields threatened its ability to invest.
“It is absolutely the right thing to do for the business,” 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.
“I look at it a bit like an operation — it might hurt a bit at the time but it will be worth it in the long run.”
Pre-tax profits fell to £479 million last year from £613 million a year earlier. The results were hurt by wet-weather claims in the UK although the overseas businesses continued to grow.
RSA’s combined ratio hit 95.4%, meaning that it effectively paid out 95p in claims for each £1 it took in premiums.
However, analysts focused on the dividend cut, warning that other insurers — such as Aviva, whose shares fell 3% — could now be forced to follow suit.