Bosses fired over insurance scandal
Published 09/01/2014 | 10:07
RSA Insurance has attempted to draw a line under the scandal at its Irish arm by firing two senior executives following an independent investigation which found "inappropriate collaboration" among managers led to a 240 million euro hole in its finances.
The report, led by PricewaterhouseCoopers, confirmed the issues were isolated to Ireland and alleged executives sought to deliberately sidestep group governance controls.
RSA said Irish finance boss Rory O'Connor and the division's claims director Peter Burke were fired over the issu e on Wednesday following a disciplinary and appeals process.
Irish chief executive Philip Smith had already resigned after being suspended.
But RSA revealed yet more woes on Thursday as it said severe flooding in Ireland and the UK over Christmas, combined with the ice storms in Toronto, would further hit its 2013 figures.
The group has been rocked after its Irish crisis contributed to three profit warnings 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: "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."
PricewaterhouseCoopers (PwC) confirmed that further writedowns were not needed on top of the 240 million euro set aside to cover the Irish accounting hit.
But 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 42 million euro.
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.
A routine internal audit flagged up problems in the group's Irish arm in November, which it said would result in a 84 million euro profits hit but a month later the amount set aside was increased by 157 million euro 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 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."