RSA Insurance Group (LON: RSA) claims a lower dividend is in the best interests of its shareholders.
The shares of RSA Insurance (LSE: RSA) slumped 13p, or 10%, to 123p during early London trade this morning after the insurer cut its final dividend by 33%.
RSA today declared a final payout of 3.9p per share compared to 5.82p per share last year.
Simon Lee, RSA's chief executive, claimed:
"The Board's decision to rebase the dividend is a prudent move that will enable us to invest in the opportunities we see for growth and is in the best interests of our shareholders. It is absolutely the right thing to do for the business given the prospect of prolonged low bond yields. The new dividend is appropriate for the business today, sustainable into the future and will allow a progressive dividend policy going forward."
Mr Lee added that the 2013 interim dividend was likely to experience a similar reduction.
This morning's share-price reaction perhaps reflects some surprise at today's dividend news, given the preceding interim payout and the final dividend before that were both raised 2%.
That said, yesterday's 136p share price did support a 6.8% income based on RSA's then 9.23p per share payout. Such a high yield suggests not everyone was convinced about the FTSE 100 member's dividend prospects.
Today's statement suggests RSA investors can expect to collect a 6.09p per share dividend during the next twelve months, which at this morning's price still results in a respectable 5% yield.
RSA's dividend news accompanied full-year figures that showed net written premiums up 3% to £8.4bn and operating profits down 6% to £684m. RSA said its profit performance was affected by claims relating to adverse weather in the UK and earthquakes in Italy.
Looking ahead, Mr Lee said:
"We are excited by the prospects for the business. We expect to continue to grow net written premiums across the business and anticipate strong premium growth in 2013."
Of course, whether Mr Lee's optimism, this morning's share-price tumble and the wider outlook for insurers all combine to make RSA a 'buy' remains your decision.
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> Maynard does not own any share mentioned in this article.