Update: RSA boss Simon Lee resigns as provisions for Irish woes hit £200m
- Credit: PA
The boss of More Than insurer RSA resigned today after the company revealed that it will need to set aside more money for its troubled Irish division.
Simon Lee, whose job was on the line after two recent profits warnings, stood down with immediate effect, having held the job for two years.
RSA said a review of its Irish business found it will need to strengthen reserves by £130m, on top of the £70m hit identified last month after a routine internal audit uncovered a financial black hole in the division.
With this month’s storms in the UK and Scandinavia costing it another £25m in claims, RSA warned of a further reduction in earnings for this year and an impact on next year’s dividend payout for shareholders.
RSA chairman Martin Scicluna will take on Mr Lee’s duties while a successor is found.
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He said: “Simon felt it was in the best interests of the group that he step down to enable a change in leadership.”
Mr Scicluna also announced a review of the group’s businesses, which will be completed by the time of full-year results in the spring.
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Philip Smith, the head of RSA’s Irish division, resigned at the end of last month.
RSA’s UK operations involve more than a dozen offices across the country, including a commercial insurance team based in Princes Street, Ipswich.
Following the news of Mr Lee’s resignation and the latest profits warning, RSA shares slumped 18% in early trading today, wiping around £500million from its stock market value.
The St Jude’s storm in October cost RSA up to £65m due to wind damage and power cut claims across its UK, Scandinavia and Baltic operations.
Earlier this year it was also left counting the cost of extreme rainfall and storms in Canada during the country’s worst natural catastrophe on record.
The latest review of the Irish business relates to a surge in bodily injury claims in the motor insurance market, which requires its reserves to be strengthened by £130m. RSA will also inject £135m of capital into RSA Insurance Ireland to ensure that its solvency ratio is maintained above 200%.
Accountancy firm PwC is currently carrying out a review of the Irish business and is expected to file its report next month.
Mr Scicluna said he was confident that RSA will re-emerge as a stronger group in 2014. He added: “RSA remains a leading insurance brand. We have enviable market positions across the globe and attractive businesses with healthy underlying profitability.”
Mr Lee, who was chief executive of RSA’s international region between 2003 and 2011, will receive his contractual entitlement of £824,000 in lieu of 12 months’ notice, paid on a monthly basis.
Barrie Cornes, an insurance sector analyst at Panmure Gordon Stockbrokers, said today’s share price fall placed RSA on the radar screens of rivals looking to acquire some of its better performing businesses.
He added: “We would highlight the emerging markets business as being one which RSA might be ‘forced’ to sell but we suspect that the Canadian and Scandinavian businesses are the parts that competitors would be particularly interested in.”