RSA Insurance Group Plc Chief Executive Officer Simon Lee resigned as the company bolstered reserves in Ireland. The shares fell as much as 22 percent.
The insurer added an additional £130 million ($212 million) to its Irish reserves and forecast a “further reduction” in 2013 earnings, London-based RSA said in a statement today. Chairman Martin Scicluna will lead the company until a new CEO is named.
“The last remaining prop for the shares, namely the dividend, is now likely to be materially weakened,” said Eamonn Flanagan, an analyst at Shore Capital Group Ltd. in a note to investors. He has a hold rating on the stock. “The decisive action taken by the board and the quality of its assets across the globe should ensure that any fall in price be contained.”
RSA is investigating whether the Irish unit reported the amount of premiums paid to the company earlier than it should have and the timing of when reserves were set aside to cover insurance claims. RSA Ireland CEO Philip Smith resigned last month, while the unit’s Chief Financial Officer Rory O’Connor and claims director Peter Burke were suspended.
The stock tumbled as much as 21.5 pence, in the biggest intraday decline since August, 2002. They were down 16 percent at 83.90 pence at 8:03 a.m. in London trading.
The company also said storms in December in the U.K. and Ireland had led to net claims of £25 million [$40.77 million]. The firm said it expects a “mid-single digit” return on equity, a measure of profitability, for 2013 and will take the events of the final quarter into account when deciding its final dividend.
The investigation, announced last month, sparked a selloff in RSA shares in more than a decade as analysts questioned internal controls and Britain’s biggest non-life insurer injected €100 million euros ($137.55 million) into the business to bolster capital. Ireland’s central bank first identified concerns over RSA’s local unit in August.
–Editors: Jon Menon, Simone Meier