RSA Whacked by Wet Weather

LONDON -- RSA Insurance Group (ISE: RSA.L) has had a tough start to 2012. Best known in the U.K. for its "More Than" brand, the insurer posted a 38% decline in first-half profits to 233 million pounds.

As RSA had already warned, these figures were hit by a combination of 40 million pounds for the recent U.K. floods and 35 million pounds for damage relating to earthquakes in Italy. This helped drive its combined operating ratio -- a measure of premiums earned to costs and claims -- from 93.2% to 95.2%.

Investment returns are also a key element of profits for insurance companies, and here RSA also saw a dip from the numbers reported for 2011, although this was partly due to a one-off rental settlement that fell into last year's figures.

Despite the fall in profits, RSA was still able to declare a small increase in its dividend, by 2% to 3.41 pence. The full-year forecast yield stands at a whopping 8.5%. That said, the insurance sector is no stranger to high dividend yields at the moment. Rivals Legal & General (ISE: LGEN.L) and Aviva (ISE: AV.L) offer projected payouts of 5.7% and 9.3%, respectively.

With respect to net asset value per share, RSA reported a slight fall from 104 pence to 102 pence, just below the current share price of 111 pence.

RSA is continuing to push overseas expansion, with more than 70% of premiums expected to come from outside the U.K. by 2015. Scandinavia, Canada, and various emerging markets are the main targets. RSA is also pretty confident on the prospects for the remainder of 2012, predicting a combined operating ratio of less than 96% for the whole year (the second half normally sees higher costs) and investment income of around 500 million pounds.

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