RSA seeks to raise £775m with rights issue

Stephen Hester has pressed the button on a plan to shore up RSA’s balance sheet by as much as £1.5 billion, including one of the biggest equity raisings by a UK insurer and a series of disposals.

The former Royal Bank of Scotland chief, drafted in to run RSA after a series of profit warnings, yesterday launched a rights issue to raise £775 million.

It is expected to be priced at a discount of between 35 and 40 per cent to its “undisturbed” share price – the level before it moved on reports of a fund raising.

As part of a wider “capital management plan” designed to save an additional sum of about £700 million, Mr Hester is also undertaking disposals that he hopes will raise £300 million this year.

RSA said its operations in Britain and Ireland, Canada, Scandinavia and Latin America would form the “core of the group” – indicating it would get rid of operations in eastern Europe and Asia. Some asset sales are already under way, Mr Hester said.

Scrapping dividend
Other measures include scrapping the final dividend, taking out an "adverse development" £550 million reinsurance policy, selling its headquarters in Sweden and disposing of the equities in its investment portfolio.

Mr Hester put forward his plans to turn around the business alongside full-year results. A series of writedowns pushed the group to a pre-tax £244 million loss compared with profits of £448 million a year ago.

In his first comments since taking the helm, Mr Hester said that "over some years", RSA – which sells cover including home, motor and commercial insurance to 17 million customers worldwide – had become "gradually undercapitalised and overleveraged".
– Copyright The Financial Times Limited 2014