RSA shares soar on reports Irish arm won't need further cash injections
SHARES in insurance giant RSA jumped the most in almost five years on the London stock exchange yesterday morning amid reports that the group's Irish operation wouldn't need any more capital injections.
The 'Sunday Telegraph' reported that the independent investigation into the £200m (€240m) black hole at the Irish operation was an isolated incident with no further write-downs needed.
It said that the report from accountancy firm PwC, which has been leading the probe, is expected to draw a line under the controversy and claim it is a one off.
However, RSA declined to comment ahead of the publication of the report on Thursday. It will be posting an update to the stock exchange on Thursday morning.
A spokesperson for PwC in Ireland could not be reached.
The report will have eased the pressure on the insurance giant after a difficult end to 2013 that saw resignations of some top brass. It also suffered a downgrade of its credit rating.
The stock rose as much as 7.5pc yesterday morning -- the first day of trading following the report.
RSA issued three profit warnings in less than six weeks amid a capital shortfall at its Irish unit. Most of the problems stem from the Irish operation, which had to be shored up with an extra €235m in capital.
The ongoing debacle at RSA Ireland led to the resignation of its group chief executive, Simon Lee, in early December.
The move followed the resignation in November of RSA Ireland chief executive Philip Smith after financial irregularities were discovered in the Irish arm.
RSA said its Irish division had not put enough funds aside to meet likely claims, especially for those involving injuries to drivers insured with it.
Pressure mounted on the insurance group last month after ratings giant Standard & Poor's cut its credit rating to its lowest level in more than a decade, sparking fears of more downgrades, threatening its ability to retain commercial clients.
S&P lowered RSA one notch to A-, the lowest since 2002, and said the company could be downgraded up to two more levels in the next 90 days.
When the review was announced in early November the group said it would focus on the financial and regulatory reporting processes and controls within the Irish business as well as the group oversight and controls during the relevant period. It said it would also assess the adequacy of the remedial actions being taken.
The financial turmoil at the Irish division is set to cost families around €100 in higher premiums, experts at Goodbody stockbrokers have said.
This is because RSA will be forced to hike premiums after its parent company had to shore it up, Goodbody predicted last month.
And other insurers will now seize the opportunity from the hobbling of RSA to charge more for home and motor policies, said insurance analyst Eamonn Hughes.
RSA's stock closed up 6pc yesterday evening.