Last checked at (Sharecast News) - RSA Insurance has suspended its final dividend to strengthen its finances during the Covid-19 crisis after coming under pressure from the Bank of England.
The general insurer said it was strongly capitalised but that it was important for insurers to have maximum confidence in its ability to support customers during the coronavirus emergency. RSA said it also took into account regulators' concerns about short-term use of capital.
RSA will suspend the 15.6p a share final payout for the year to the end of December and withdraw the resolution proposing the dividend at its annual meeting. The FTSE 100 company said it wanted to restart dividends as soon as possible but that this might not happen in time for the next scheduled announcement.
RSA said it was too early to estimate the impact of the crisis on its business but that its solvency was within its target range and more than 150% before the decision to scrap the dividend was made.
Martin Scicluna, RSA's chairman, said: "This is a difficult decision, not least in terms of the initial impact it will have on shareholders. The company has a strong capital base, but we think it is right and prudent, for the many businesses and people that we support as well as wider stakeholders, to take these steps now, and ensure that RSA is well placed to continue doing what we can to help through this crisis."
RSA joins Aviva and Direct Line in cancelling its final dividend after the Bank of England told insurers to consider their financial strength when deciding on dividends during the crisis, which could lead to a surge in claims. However, Legal & General said on Friday it would go ahead with its final dividend.
The BoE backed RSA and other insurers deferring payouts. In a statement the central bank said: "We welcome the prudent decision from some insurance companies today to pause dividends given the uncertainties associated with Covid-19.
"When insurers are considering whether or not to proceed with any dividend payments, their boards should pay close attention to the need to protect policyholders and maintain safety and soundness."
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