RSA Irish investigation goes back at least two years

Monday 11 November 2013 18.19
RSA shares slump in London trade today
RSA shares slump in London trade today

Britain's largest general insurer Royal and Sun Alliance is probing losses and premiums at its Irish unit stretching back at least two years.

This comes after an internal audit of the business triggered the group's second profit warning in a week.

Shares in the insurer tumbled as much as 17% in London trade, eventually closing 10.5% lower at 109.7p.

It was investors's first opportunity to react to RSA's disclosure on Friday that it had uncovered "issues" at its Irish operations and had suspended three top executives there.

RSA chief executive Simon Lee sought to reassure investors that the company's dividend, which was cut earlier this year, was secure but said RSA would be more cautious about bolt-on acquisitions.

"Clearly the hit we've taken means while our capital positions remain strong, they are not as flexible as they were pre-hit and we will be judicious in our approach to mergers and acquisitions going forward," Lee told a conference call with analysts.

RSA has appointed auditor PricewaterhouseCoopers to review the Irish operation's financial and regulatory processes and controls and group oversight of the division. It has injected fresh capital into it.

The company said today it has suspended the Irish unit's chief executive Philip Smith, chief financial officer Rory O'Connor and claims director Peter Burke pending the outcome of the review.

"No findings have been made against any individuals at this time," RSA said. 

RSA's group chief financial officer Richard Houghton said the company was examining "the booking of large losses within claims and the timing of the recognition of earned premiums."

He added the issue dates back at least two years.

The problems at the Irish unit mean that RSA's 2013 operating result will be £70m sterling lower than current market expectations.

This amounted to RSA's second profit warning within one week. Three days earlier, the company said full year returns would suffer after severe weather in Europe and Canada were "materially above assumptions".

"This is obviously proving to be a very difficult year for the group," Lee said, adding he expects 2014 to be better.

Ireland accounts for a relatively small part of RSA, making up just 4% of group premiums last year.

The insurer's shares plunged at today's opening to hit their lowest since June 2012 and were nearly 11% lower in afternoon trade.