Just like a lot of British houses this summer, U.K. insurance stocks are sinking.
The country’s nonlife insurers sector had its steepest drop in more than a year-and-a-half on Friday after its biggest constituent, RSA Insurance Group Plc, warned this year’s profit has been hit by unfavorable weather at home and in North America.
Among RSA’s troubles has been an increase in claims for household subsidence as a result of a summer heatwave, Chief Financial Officer Scott Egan said on a conference call.
“When the ground dries out that much, homes and other buildings start to move, and cracks begin appearing in walls. Then you have to call your insurer,” said Bloomberg Intelligence analyst Kevin Ryan. “It’s extraordinary. We haven’t had that here for about 20 years.”
While RSA’s year-to-date pretax profit is higher than 2017, it’s down on an adjusted basis, “due primarily to elevated weather costs,” the insurer said in a statement Friday. Claims relating to flash flooding in the U.K. in May and marine loss on a tornado in Iowa also contributed to the weather woes.
RSA shares plunged as much as 9.7 percent in London, the biggest intraday drop since Britain voted to leave the European Union in June 2016. Peers including Direct Line Insurance Group Plc and Admiral Group Plc also slid, causing the FTSE 350 Nonlife Insurance Index to drop as much as 3.5 percent, its steepest fall since February 2017.