RSA losses of €257.6m after financial irregularities

Financial and claim irregularities at the Irish arm of RSA Insurance contributed to the firm recording pre-tax losses here of €257.6m last year.

New accounts just filed by RSA Insurance Ireland Ltd with the Companies Office show that the firm recorded the pre-tax losses after revenues from net premiums reduced by 19%.

The investigation into the irregularities also resulted in the firm reducing its 2012 pre-tax profit by €19.8m from €44.47m to €24.62m.

The directors state that “2013 was an extremely disappointing year for the company involving the discovery of irregularities in our claims and finance functions and the need for significant strengthening of reserves”.

Following an internal disciplinary process, the firm’s chief financial officer, Rory O’Connor and the claims director Peter Burke were dismissed in January for their roles in relation to large loss and claims accounting irregularities.

The chief executive of RSA Insurance here, Philip Smith was initially suspended by the firm as it investigated the irregularities and he subsequently resigned from his post, claiming that he had been made the “fall guy for all issues”.

The uncovering of the irregularities resulted in the RSA Group making two separate injections of capital into the firm totalling €262m in November and December of last year and an additional €48m in March 2014.

According to the directors’ report, the irregularities involved inappropriate collaboration on large loss and claims’ accounting. The report states the cumulative impact of the issues identified was €84m. The figures for 2013 show after a taxation credit of €22.9m the firm’s post tax loss was €234.7m.

The accounts show the firm’s income from gross premiums last year reduced by 18% or €90m from €498.7m to €408.1m with income from net premiums declining by 19% from €452.4m to €365m.

The loss takes account of €9.2m in unrealised losses on investments; a €29m impairment on a 123 Money Investment and €37.4m on investment income.

The directors state “this is a very disappointing result which was materially impacted by claims and accounting issues uncovered in Q4, 2013”.