RSA Ireland issues warning over company’s audited accounts

Mark Paul

RSA Ireland, the insurance company which recently suspended three senior executives over alleged irregularities in its claims and provisioning functions, has put a retrospective health warning on its 2012 accounts, which were released yesterday.

The company said the accounts were approved in April by the board, including its currently suspended chief executive Philip Smith, whose signature appears on the financial statements released yesterday.

In an unusual move, however, the directors indicated in a note attached to the accounts that there is a possibility the figures may have to be changed at a future date, depending upon the results of an ongoing investigation into the alleged irregularities.

“Since [the board approved the accounts in April], issues in the Irish claims and finance functions have been identified. Those matters are still under investigation at the time of filing,” the directors said.

“Should they have a material impact on the company’s financial position as of 31st December 2012 this will be addressed at the earliest opportunity.”

The results from RSA’s Irish arm, which owns the online insurer 123.ie, show that its gross written premiums last year in Ireland were €498 million, up from €492 million the previous year.

RSA Ireland recorded profits of €38.6 million, a seven-fold increase on the profits for the previous year. It also made a provision for claims of more than €50 million, up from €5.2 million the previous year.

The company, which is Ireland’s largest general insurer, attributed its improved financial performance to a boost from 123.ie and also “improved rating actions”.

Earlier this month, RSA suspended Mr Smith, chief financial officer Rory O'Connor and claims director Peter Burke following the discovery of a capital shortfall at the company after an internal review. No findings have been made against them so far.

The shortfall is understood to be related to alleged underprovisioning for large claims, which would have the effect of effectively boosting trading figures at the expense of its reserves.

It later emerged that the Central Bank had raised concerns with RSA Ireland in recent months, and had conducted eight spot checks of its operations over the las two years.

RSA group, which is headquartered in Britain, told investors the problems in the Irish unit would knock about £70 million, or 15 per cent, off its overall profits, prompting an angry response from shareholders.

Separately, it also said this month it was setting aside up to £140 million to cover increased motor claims in Ireland.

RSA group this month injected €100 million into the Irish operation after the capital shortfall was discovered, which led to the suspensions.

There two separate investigations ongoing into the issues identified. Price Water Coopers is currently assisting the board of the Irish unit in probing the issues. The company was unable to say when the results of that investigation would become clear.

PWC is also leading a separate investigation into the practices and procedures adopted by RSA Ireland in terms of its claims management and provisioning. That review is expected to be completed before the end of the year.

RSA Ireland declined to comment further yesterday.