Shares in RSA Insurance slumped yesterday, after the More Than owner slashed its full-year dividend by a third.
Chief executive Simon Lee said it was a prudent move that would enable the company to invest in opportunities for growth.
But the decision to rebase the dividend wrong-footed investors, causing its shares to slide 14% in the FTSE 100 Index and pulling rival Aviva 4% lower.
The cut in the payout to 3.9p a share, from 5.82p a year earlier, came as RSA announced a 6% drop in operating profits to £684 million.
Net written premiums rose 5% at constant exchange rates to £8.3 billion but RSA was impacted by summer floods in the UK and two earthquakes in Italy, prompting it to revise its planning assumptions after an increase in the number of severe weather events over recent years.
The continuing effect of falling bond yields meant RSA's investment income was down 11% to £515m and the prospect of this figure dropping to £470m in 2013 also prompted the decision to rebase the dividend.
Mr Lee said: "The new dividend is appropriate for the business today, and will allow a progressive policy going forward."
RSA revealed a £50 million hit in July after the UK's dire summer weather resulted in more than 6,500 claims since June alone.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article