RSA Insurance intends to raise £775m (€945m) in a share sale and has scrapped its final dividend to replenish capital depleted by scandals at its Irish unit.
The plan was announced as the company unveiled a £244m pre-tax loss for 2013, after having to address an accounting scandal at its Irish arm and suffering weather-related losses.
“We have reluctantly concluded we must ask shareholders, via a rights issue, for a substantial sum to augment the ‘self help’ and complete our capital plan,” said chief executive Stephen Hester, 53, who joined the company three weeks ago. “This money is needed to get our capital position to a strong place.”
The rights offering represents 20pc of RSA’s market value, he added. A company statement, meanwhile, said a final dividend “could not be justified.”
Mr Hester succeeded Simon Lee, who quit after issuing three profit warnings in the fourth quarter and injecting £200m into RSA’s troubled Irish business amid an accounting probe into the unit. About £1.3bn was wiped off RSA’s market value in 2013. The shares have since rebounded 12pc this year, valuing the insurer at £3.7bn.
The company is now under pressure to defend itself from downgrades by international ratings agencies. S&P cut RSA’s rating to A- in December and said it could be downgraded further, threatening the insurer’s ability to retain commercial clients.
It has emphasised its commitment to serving the Irish market. The UK and Ireland, Canada, Scandinavia and Latin America business would be the company’s “core” markets, Mr Hester said, adding that “selected business disposals” had started to target £300m of proceeds in 2014.
Divisions likely to be sold of include its central and eastern European units including Link4 in Poland and Balta in Latvia.