Partly Cloudy

Partly Cloudy

max temp: 11°C

min temp: 1°C

ESTD 1874 Search

Insurance: RSA launches £775m rights issue following slump in profits

13:29 27 February 2014

RSA is to tap its shareholders following hefty weather claims and a slump in profits.

RSA is to tap its shareholders following hefty weather claims and a slump in profits.

Former RBS boss Stephen Hester launched a huge City fundraising today as part of his bid to revive More Than insurer RSA.

shares

Mr Hester, who joined the company less than a month ago, revealed the extent of RSA’s current difficulties by announcing that operating profits for 2013 had slumped to £286million from £601m the previous year.

He scrapped the company’s dividend and asked shareholders to stump up £775m in a rights issue, equivalent to 20% of RSA’s market value, in order to repair the insurer’s balance sheet.

The company, which has operations in the UK, Scandinavia and Canada, has been hit by a series of profit warnings, an accounting scandal at its Irish subsidiary and a surge in flood claims following the wettest winter on record.

Mr Hester said: “RSA’s 2013 results are poor and we need to grasp the nettles of both underperformance and undercapitalisation.”

The recent weather has continued to hamper the company’s recovery plans, with flooding in the UK and Ireland and ice storms in Canada likely to result in a claims hit of between £75m and £100m.

This is on top of the £41m incurred by its UK and Europe division in the final quarter of last year, including from the impact of the Xaver storm.

In the UK, RSA made an underwriting profit of £36m as a result of a good performance in its property and household books, offset by losses in personal motor insurance.

In Ireland, the underwriting loss was £220m, reflecting the need for reserves strengthening and the impact of the irregularities within the Irish claims and finance functions.

RSA recently sought to draw a line under its Irish scandal after an independent investigation found “inappropriate collaboration” among the division’s managers led to a £200m black hole.

Mr Hester is being paid an annual salary of £950,000, with the potential for long-term incentive scheme shares worth up to £2.9m this year on top of a potential annual bonus.

He received praise for leading the rescue of RBS but left the state-backed lender at the end of September after five years at the helm. It was thought his departure followed a series of rows with Chancellor George Osborne.

shares

0 comments

Tom Boother is running from Land's End to John O'Groats in aid of EACH and Great Ormond Street. Marquis Suffolk is lending Tom a motorhome for him to sleep in during the challenge.

Tom’s charity challenge - running 816 miles from Land’s End to John O’Groats

Mark Thomas, MD of Coderus

Innovative Google I/O Extended 2016 event to be held at Adastral Park

Royal Bank of Scotland has reported a sharp increase in first quarter losses.

Royal Bank of Scotland has reported a first-quarter pre-tax loss of £968million, more than double last year’s figure of £446m.

Luke Myers who became Greene King's 1,000th apprentice of 2015.

Pubs and brewing group Greene King has formed a partnership with the Prince’s Trust to help unemployed young people find work.

Nicola Corbett of EDF Energy.

Budding entrepreneurs from Woodbridge School have been crowned as winners in the 2016 Suffolk Young Enterprise contest.

Most read

Great Days Out

cover

Click here to view
the Great Days Out
supplement

View

Most commented

HOT JOBS

Show Job Lists

Streetlife

Newsletter Sign Up

Great British Life

Great British Life
MyDate24 MyPhotos24