RSA Doubles Storm Loss Estimates

January 19, 2001

Britain’s Royal & Sun Alliance announced that loss estimates for the fourth quarter of 2000 are between £180 million ($267.5 million) and £200 million ($297 million) almost doubling the previous figures.

Floods and storms in the U.K., Europe and Canada combined to increase the estimates, but the announcement had little impact on company shares, which rose 1.5 percent.

Analysts apparently felt that all the bad news had been revealed, and although they lowered earnings estimates, it was their general consensus that RSA would meet the announced target set by CEO Bob Mendelsohn of achieving a 103 percent loss ration for 2000.

The estimates were also helped by rate increases particularly in commercial lines. North American premiums have risen by about 20 percent over the past year, and RSA is already planning increases in the U.K. and other areas. However, in a move aimed at calming public fears over steep rate hikes, the company announced that any premium increase in areas affected by the U.K. floods would be moderate.

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