RSA Tumbles after Insurer Suspends Executives at Irish Operation

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RSA Insurance Group Plc, Britain’s biggest non-life insurer, tumbled by the most in more than nine years in London trading after the company suspended three top executives at its Irish operation.

The stock fell as much as 16 percent, the steepest decline since March 2004, to 101 pence [$1.62] and was down 13 percent at 105 pence [$1.69] as of as of 8:21 a.m. today.

Britain’s biggest non-life insurer by market value said late on Nov. 8 its full-year operating result will be £70 million ($112 million) lower than analysts estimate after it had to inject additional capital into its Irish division. The company hired PricewaterhouseCoopers LLP to report on oversight and controls at the unit by the year-end, the insurer said in a statement yesterday.

“We are extremely disappointed with the issues which have been identified and their financial impact on the group,” Chief Executive Officer Simon Lee, 52, said in the statement. “I am confident that these issues are isolated to the Irish business.”

RSA’s warning that it would miss its profitability target is the company’s second in a week. The London-based insurer told investors on Nov. 5 it will miss its 10 percent target for return on equity following last month’s storms in Europe. RSA is likely to report full-year pretax profit of £491 million [$790 million], according to the median estimate of 19 analysts surveyed by Bloomberg.

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The shares have fallen 16 percent this year in London trading, the worst performance in the 19-member FTSE 350 Insurance Index.

Lee, who became CEO two years ago, said in yesterday’s statement RSA’s capital position is “robust” and the company remains “committed to our dividend policy which is aligned with market expectation for the full-year final 2013 dividend.” The insurer will probably pay a final dividend of 4.02 pence [app.6.5 cents] a share, according to data compiled by Bloomberg.

RSA Insurance Ireland is the biggest non-life insurer in the country. It sells products through a network of brokers and the 123.ie website. It reported profit of £25 million [$40.25 million] in 2012.

A routine internal audit uncovered the issues in the claims and finance functions at the Irish division, RSA said on Nov. 8. The company said it injected capital into the unit “to ensure its solvency ratio is comfortably in excess of 200 percent.”

RSA suspended the Irish unit’s CEO, Philip Smith, as well as Rory O’Connor, RSA Ireland’s chief financial officer, and the unit’s claims director, Peter Burke. The company said in its statement that it hasn’t made findings against any individuals. An RSA spokesman declined to provide contact information for the executives, none of whom immediately responded to e-mails sent through their LinkedIn Corp. pages.

The insurer also notified the Irish central bank of a regulatory issue at the division, Ronan Sheridan, a spokesman for the regulator, said by e-mail.

–With assistance from Donal Griffin and Joe Brennan in Dublin. Editors: Edward Evans, Simone Meier