LONDON (Reuters) - Shares in RSA (RSA.L) leapt on Thursday as the British insurer estimated its exposure to the coronavirus pandemic at just 25 million pounds ($31 million) and said most of its business interruption policies did not offer cover.
There was little effect from the pandemic on RSA’s first-quarter results, with business operating profit up by double digit percentages, the home, motor and commercial insurer said in a statement.
Best known in Britain for its “More than” brand, RSA also has large operations in Canada, Ireland and Scandinavia.
It is one of several top insurers facing the possibility of multimillion-pound lawsuits from small businesses in Britain which allege legitimate business interruption claims have been rejected.
The Financial Conduct Authority said last week it was seeking clarity from the courts to resolve uncertainty over business interruption payments.
“The great majority of business interruption claims are not expected to be eligible under their coverage terms for COVID-19”, RSA said, referring to the disease caused by the new coronavirus.
However, it added that for claims due to the pandemic in general “it is expected that some cases will be challenged and may have outcomes the same or different to our expectations”.
RSA's shares jumped as much as 7% at the open and were up 4.5% at 386.2 pence at 0726 GMT, at the top of the FTSE 100 .FTSE.
Panmure analyst Barrie Cornes said the share price “reflects a too pessimistic view of the ultimate cost of COVID on the business”, reiterating his “buy” rating on the stock.
RSA said it had received around 25,000 claims on which it would pay out, of which around 23,000 were travel related.
RSA said last month it would not pay its 2019 final dividend, following pressure from regulators on insurers to protect policyholders and ensure strong levels of capital.
Chief Executive Stephen Hester said RSA was “resilient”.
“We are also very conscious of our shareholder responsibilities, especially with regards to restarting dividend payments when it is prudent to do so,” he added.
The group’s solvency ratio fell to 151% from 168% at the end of December due to market moves and planned pension contributions, but remained within the insurer’s 130-160% target range.
A level above 100% indicates an insurer has sufficient capital.
Net written premiums totalled 1.5 billion pounds in the first quarter, down 1% from a year earlier.
Additional reporting by Muvija M. in Bengaluru; Editing by Maiya Keidan and Mark Potter