RSA shares fall 7.2 per cent after it puts extra £135m of capital into Irish subsidiary
Chief executive Simon Lee steps down as insurer issues another profit warning
RSA’s woes in Ireland emerged on November 8th when it announced the suspension of chief executive Philip Smith, chief financial officer Rory O’Connor and claims director Peter Burke pending the outcome of an investigation into issues involving “claims and finance functions which were identified during a routine internal audit”.
Shares in British insurer RSA fell by 7.2 per cent in London yesterday after the company said it had provided another £135 million (€160 million) in capital to its Irish subsidiary to keep its regulatory reserve ratios above 200 per cent.
This brings to £235 million the amount injected into RSA Ireland in the past five weeks.
RSA also announced yesterday that chief executive Simon Lee had left with immediate effect, following its third profit warning in six weeks.
“We also experienced further adverse weather in early December with storms in the UK and Scandinavia leading to net claims of £25 million for the group,” it added.
RSA was the biggest faller of the day in London.
It said that, following a completion of a review, Irish reserves will need to be strengthened by £130 million.
This is in addition to the £70 million announced on November 8th relating to claims and finance issues in Ireland.
The insurer said a review of the issues in Ireland by PwC was “ongoing”. PwC is expected to report back in January.
RSA’s woes in Ireland emerged on November 8th when it announced the suspension of chief executive Philip Smith, chief financial officer Rory O’Connor and claims director Peter Burke pending the outcome of an investigation into issues involving “claims and finance functions which were identified during a routine internal audit”. RSA also injected £100 million into the Irish business to bolster its reserves.
Mr Smith resigned late last month, claiming to be the “fall guy” for the issues that have arisen. Mr O’Connor and Mr Burke remain on suspension.
RSA said yesterday that the impact of the Irish reserve strengthening and the storms in Europe last week would lead to a further reduction in anticipated 2013 earnings.
“We now expect mid-single digit group return on equity in 2013. The impact of events in the last quarter will need to be taken into consideration when the board determines the 2013 final dividend recommendation in February 2014,” the company said.
Non-executive chairman Martin Scicluna has become executive chairman until a permanent replacement for Mr Lee is hired.
Mr Scicluna said he was initiating a full review of the group’s businesses with the objectives of improving its capital strength, “optimising the group’s business portfolio and delivering a sustainable dividend into the future”.
A spokesman for RSA in Ireland said it continues to be “business as usual” for its 950,000 policyholders.