Criticising RSA’s recent shareholder payout is like “dancing on the head of a pin” given it was so close to the City’s forecast, chief executive Stephen Hester has argued.
The insurance giant unveiled a near 80pc boost in pre-tax profits to £263m for the year to June 30, causing it to hike up its dividends by a third on last year to 6.6p.
However the dividend was lower than the 7p forecast by City analysts, with shares dipping following the announcement as investors were left wanting more.
Mr Hester, who joined the insurer from the Royal Bank of Scotland in 2014 to give it an overhaul, shrugged off the fall and said he was not concerned investors were unsatisfied. The stock closed down 0.5pc, or 3p, on the day.
“Whether they go up or down one or two percent in a day says nothing very much at the moment,” he said, noting that the insurer beat analyst forecasts in all other areas.
“What is absolutely true is that in a world of low interest rates stock markets are valuing dividends highly and rewarding companies that pay high dividends. That’s especially true of insurance companies, seen as steady eddies – that’s why we put them up by 32pc.”
The group said in its earnings report that it was still targeting a payout ratio of 40-50pc of earnings, with “additional distributions where justified”.
The FTSE 100 insurer has completed a restructuring programme aimed at boosting profitability and slashing costs, although Mr Hester said headwinds remain.
The market for insurance companies is currently “flat as a pancake”, he warned, with low interest rates, rising competition from technology and volatile markets meaning the group needs to be self-sufficient.
“What I spend my time doing together with my colleagues is trying to make sure our self-help actions go in the [right] direction and we don’t drop too many balls,” he said.
The firm’s UK business put aside £42m relating to the Government’s change in the so-called Ogden discount rate during the period.