RSA’s chief executive Simon Lee has quit after the insurer warned on profits for the third time in six weeks, prompting the chairman to initiate a review that could lead to the sale of part of the business.
RSA’s troubles stem partly from accounting problems at its Irish business, which the insurer yesterday said needed another £130m (€154m) to plug a capital hole, on top of the £70m identified in November.
The resignation of Mr Lee, who leaves with a one-year pay packet of £824,000, caps a difficult year for Britain’s largest general insurer. It cut its dividend in February because of weak investment returns and has underperformed its European peers, such as Aviva and Italy’s Generali, this year by about 40%.
Chairman Martin Scicluna, who will take on an executive role until Lee is replaced, said the objective was to improve the capital strength of the group, which has been put under pressure by its Irish business. Accounting firm PWC is investigating allegations of irregularities and accounting issues and is due to report in January.
“In terms of disposals, we’ll make whatever we need to make,” Scicluna told Reuters. He said he had not identified any particular businesses to be sold.
RSA will release results of the review with full-year earnings in late February.
The group, which makes about two-thirds of its revenue outside Britain, has businesses in Scandinavia, Canada, Europe, Asia and the Middle East. Analysts said RSA’s emerging markets — Canadian and Scandinavian businesses — were likely to attract interest from competitors if they are included in a disposal programme.
Yesterday, RSA said it had completed a review of RSA Insurance Ireland and would strengthen its reserves and inject £135m of capital into the division. That, combined with £25m in claims from storms in Europe, would lead to a further reduction in anticipated 2013 earnings, the insurer said.
Ahead of this latest warning, analysts had predicted a full-year dividend of 6.18p per share. RSA’s shares dropped nearly 20% at one stage on Friday, their biggest daily fall since August 2002.
Scicluna said the search for a replacement for Lee had begun, with no particular candidate in mind. Irish business head Philip Smith resigned last month.
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