Ireland’s biggest insurance company RSA expects to return to profit in 2016 after three years of heavy losses following the emergence of financial issues in 2013 that rocked the business.
The Irish Times has learned that RSA has briefed brokers in recent days about its plan to return to the black next year. This is a key part of a three-year operational plan covering the period up to 2017, which is designed to restore profitability and generate an acceptable return on capital for its listed UK parent group.
It also expects to meet the new Solvency II regulatory rules on capital, which are due to take effect from the beginning of January.
RSA made a loss of €176.6 million in 2014, down from the €234.7 million deficit posted in the previous year.
Last year’s loss included a once-off exceptional charge of €48.8 million relating to restructuring costs and impairment charges. This suggests operational losses of €128 million in 2014.
It is understood that the company expects its operational losses to more than halve in 2015 followed by a return to profit next year as it regains momentum from the issues that emerged two years ago.
This is being driven by growth in new business, improved investment income returns, an increase in premiums and reduced employee costs.
In a trading update published on November 5th, the RSA group said it had achieved net written premiums in Ireland of £197 million (€273 million), which was down 5 per cent at constant exchange rates, and “broadly in line with our expectations, reflecting the ongoing impact of our remediation work”.
RSA has reduced its headcount in Ireland by 150 over the past two years as the business has been restructured following the emergence in 2013 of irregularities in its claims and finance functions, and issues around bodily injury claims.
This resulted in three senior executives being suspended and litigation between the insurer and its former chief executive in Ireland, Philip Smith.
RSA’s parent company was also required to bolster the Irish company’s capital reserves by €399 million in 2013 and 2014.
Earlier this year, Mr Smith was granted an award of €1.25 million by the
Employment Appeals Tribunal
(EAT) in his constructive dismissal case against RSA. In June, RSA said it would appeal the award to the High Court.
The other two Irish executives suspended by RSA in 2013 – former claims director Peter Burke and the chief financial officer Rory O'Connor – also took cases against RSA. Mr Burke's case was settled last week without the need for a hearing at the EAT while Mr O'Connor's was settled in June.
In spite of the difficulties experienced by RSA in Ireland in the past two years, the group's chief executive Stephen Hester has said the Irish business remains a core part of the company's operation.
The restructuring in Ireland is part of a wider refocus by RSA at international level. It recently agreed the sale of its Latin America business for £403 million to bring total disposal proceeds, which included the sell-off of businesses in India, China, Hong Kong and Singapore, to £1.2 billion. It is also planning to exit its operations in Russian and the Middle East to focus its activities on the UK, Canada, Scandinavia, Germany and Ireland.