RSA Drops 3% on Bad Weather


LONDON -- RSAInsurance (ISE: RSA.L) dropped 3.5 pence, or 3%, to 105 pence this morning after updating shareholders about the cost of the U.K.'s recent poor weather.

The FTSE 100 (UKX) insurer revealed the net loss across the group's U.K. household, motor, and commercial property portfolios would be 40 million pounds following the wettest June on record. In addition, RSA admitted the impact of the continued rainfall during July would be 10 million pounds.

Today's statement also said two earthquakes in the Emilia-Romagna region of Italy during May would cost the group a further 35 million pounds.

Looking toward the rest of the year, and assuming "a more normal level of weather losses," RSA claimed its combined operating ratio for 2012 was now expected to be better than 96%.

Back in May, RSA had expected its combined operating ratio for 2012 to be better than 95%. A combined operating ratio is a measure of profitability for insurers. A ratio below 100% indicates the insurer is making an underwriting profit, while a ratio above 100% signals the company is paying more in claims than it collects in premiums. RSA's combined operating ratio of 2011 was 95%.

This morning's price reaction has put RSA's trailing dividend yield at 8.7%. It's very attractive, although the insurance industry is not really renowned for dependable payouts while most surprises in the sector tend not to be pleasant.

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At the time thisarticle was published Maynard does not own any share mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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