Insurance giant now hit by huge losses on markets
HUNDREDS of millions were wiped off the value of insurance giant RSA on the markets yesterday, as investors finally got a chance to react to news of a hole in the accounts of its Irish unit.
Problems being investigated at the Irish subsidiary go back over at least two years, one of the most senior executives at its British parent said yesterday.
The former Royal and Sun Alliance was forced to inject €100m into the Irish unit last week, after an internal audit revealed "issues" on the balance sheet of the business here.
The financial shortfall at the unit here is understood to be linked to so-called provisioning, or how money is set aside to cope with potential insurance claims.
Yesterday investors got their first chance to react to the news, and promptly battered RSA.
Shares in the London-listed insurer plunged as much as 17pc in early trading – wiping hundreds of millions off the market value of the company, and ending the session down 10.5pc.
With a "market capitalisation" of around £4bn, a 10.5pc share-price drop means more than €400m effectively wiped off the value of the business.
Group chief financial officer, Richard Houghton, indicated that the hole in the Irish accounts dates back at least two years. RSA is examining "the booking of large losses within claims and the timing of the recognition of earned premiums", Mr Houghton said.
The chief executive officer of RSA, Simon Lee, told investors and analysts that dividends would not be affected, even after the huge problems in Ireland.
The company has now hired accountants Pricewaterhouse- Coopers, to prepare a report on oversight and controls at the Irish unit.
The Central Bank's director of Credit Institutions and Insurance Supervision, Fiona Muldoon, said regulators would have a role in deciding on the terms and conditions for the probe being carried into financial irregularities at RSA Insurance Ireland.
She added that she was happy with the actions taken by the company so far. The insurer has suspended three top executives and pumped €100m into the reserves of the company.