August 2, 2018 / 6:43 AM / 3 months ago

Icy roads, frozen pipes hit insurer RSA first-half operating profit

LONDON (Reuters) - Icy roads and frozen pipes due to bad weather in Canada and Britain hit insurer RSA’s (RSA.L) first-half operating profit on Thursday, though results were in line with analyst forecasts.

General insurer RSA, best known in Britain for its More Than brand, also has major businesses in Canada, Ireland and Scandinavia. It offers motor, home and pet policies, as well as commercial insurance.

A particularly cold winter in Canada, a heavy Canadian windstorm in May and Britain’s Storm Emma were among weather conditions to impact RSA’s earnings, Chief Executive Stephen Hester told a media call.

The Canadian winter caused more motor accidents, he said.

“Weather is a random walk, we have no reason to believe the second half will be worse than normal.”

The storms and the cold in Canada and Britain also caused property damage such as frozen pipes, Chief Financial Officer Scott Egan told Reuters by telephone, though he added that bad weather was always a risk in Canada and that RSA was “very pleased” with its business there.

The company this week agreed a bancassurance deal with Canada’s Scotiabank to distribute home and motor policies.

Rival Aviva (AV.L) also said on Thursday weather conditions hit its first-half results.

RSA posted a 15 percent drop in first-half operating profit to 304 million pounds ($398.33 million) against a forecast 303 million pounds, according to a company-supplied consensus forecast.

RSA’s net written premiums dropped 5 percent to 3.2 billion pounds in constant currency terms, below a forecast 3.4 billion, and underwriting profit fell 23 percent to 171 million pounds.

“The miss in underwriting profit is not ideal but it does not look to be anything that will have a longer term impact,” Paul De’Ath, analyst at Shore Capital, said in a note.

Political uncertainty could weigh on RSA and other insurers’ investment income due to the impact on foreign exchange and interest rates, Hester, a former boss of RBS, said.

“World trade wars, any geopolitical risks that come out of debates with Iran, or it could be a hard, or soft or no-Brexit deal, have the risk of moving markets significantly.”

RSA said it would pay an interim dividend of 7.3 pence per share, in line with forecasts and up 11 percent.

RSA's shares were down 0.9 percent at 636 pence per share at 0743 GMT, compared with an 0.5 percent fall in the FTSE 100 index .FTSE.

Reporting by Carolyn Cohn, editing by Angus MacSwan and David Evans

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