October 30 2014 Latest news:
Thursday, January 9, 2014
More Than owner RSA sought to draw a line under the scandal at its Irish arm today after an independent investigation found “inappropriate collaboration” among the division’s managers led to a £200million hole in its finances.
The report, led by PricewaterhouseCoopers, confirmed that the issues were isolated to Ireland and that no further writedowns were required on top of the £200m already set aside.
However, there was further woe for RSA as it said that the flooding in the UK over Christmas and the big freeze in Canada would hit 2013 profits.
RSA said that its Irish finance boss Rory O’Connor and the division’s claims director Peter Burke were sacked yesterday following a disciplinary and appeals process. Irish chief executive Philip Smith had already resigned after being suspended.
The Irish crisis contributed to three profit warnings from RSA in six weeks in the run-up to Christmas, which led to the resignation of group chief executive Simon Lee.
RSA executive chairman Martin Scicluna said today: “The issues which emerged in our Irish business in 2013 were completely unacceptable and I have made it my personal priority to ensure that this never happens again.
“We acknowledge that there are lessons to be learnt and we are tightening elements of our control and financial framework in response to these events.”
RSA shares fell 2% amid fears over RSA’s balance sheet strength and as Panmure Gordon analyst Barrie Cornes said the latest weather losses amounted to “yet another profit warning”.
RSA said it was too early to put a figure on the impact of the weather claims, but Mr Cornes estimated profits could be knocked by another £35million.
He added that it was likely the final shareholder dividend would be axed, a payout which is under review as RSA seeks to boost its finances and as a result of the further weather hit.
RSA’s UK operations involve more than a dozen offices across the country, including a commercial insurance team based in Princes Street, Ipswich.
A routine internal audit flagged up problems in the group’s Irish arm in November, which it said would result in a £70m profits hit but a month later the amount set aside was increased by £130m to pay for a surge in motor insurance bodily injury claims in the Irish unit.
Last month it was reported that investors were calling on the 303-year-old business to put itself up for sale or dispose of international operations.
PwC, which scoured through electronic documents of some 60 staff at RSA, found governance controls were appropriately strict and there were no obvious signs that the issues in Ireland had been ignored by group bosses.
Fellow accounting firm KPMG and RSA’s internal audit team also conducted reviews, which concluded the issues were a one-off.
But PwC’s report said controls in Ireland were weak and has recommended tightening controls at local country levels and a further review of how policies are followed across the group.
RSA is working with the Prudential Regulation Authority in the UK and the Central Bank of Ireland to improve controls further.
It added that its search for a new chief executive was “progressing”. Mr Scicluna, who is leading a review of the group’s businesses, said: “The board and I remain confident that RSA will re-emerge as a stronger group during 2014.”