RSA Insurance Group Plc fired two executives in Ireland after a PricewaterhouseCoopers LLP probe found that inappropriate collaboration by managers at the division resulted in inaccurate financial reporting.
RSA Ireland Chief Financial Officer Rory O’Connor and Claims Director Peter Burke were dismissed yesterday, the London-based insurer said in a statement today.
The firings followed an investigation into the timing of reserve provisions for insurance claims and whether the unit reported the amount of premiums paid to the company earlier than it should have. RSA Ireland Chief Executive Officer Philip Smith resigned in November, saying he was made a “fall guy, while group CEO Simon Lee quit last month.
“Our investigations have confirmed that the claims irregularities in Ireland were, in large part, the result of deliberate collaboration between a small number of executives there,” RSA Executive Chairman Martin Scicluna said in the statement. “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.”
O’Connor and Burke didn’t immediately respond to e-mails sent through their LinkedIn pages.
The shares fell 2.2 percent to 98.50 pence at 8:30 a.m. in London. They closed at the highest level since Dec. 6 yesterday after declining 27 percent in 2013.
RSA said an internal audit and testing from its newly appointed external auditor, KPMG, found the financial and claims irregularities were isolated to Ireland. The insurer also reiterated its estimate that the total costs from the irregularities and reserve review will be £200 million [$329 million].
“The findings may be some relief for RSA’s management and tighter controls in Ireland will solve some short-term issues,” said Eamonn Hughes, an analyst at Goodbody Stockbrokers in Dublin. “However, it still begs the question about RSA Ireland’s strong growth in recent years.”
Nicola Faulkner, a spokeswoman for Ireland’s central bank in Dublin, said the bank’s probe into the unit would continue for some months and it is unlikely to be in a position to comment further until that process is complete.
PwC found evidence suggesting individuals intentionally circumvented parts of RSA’s controls, including its large-claim reserving policy, according to the statement. As a result, the financial records didn’t fully reflect the financial position of the business, and reports made to more senior management were “inaccurate and potentially misleading,” RSA said.
About £1.3 billion [$2.14 billion] were wiped off the company’s market value in 2013 after RSA issued three profit warnings in the fourth quarter, resulting in the resignation of Lee. The insurer has said it now expects a “mid-single digit” return on equity for 2013.
The company said today weather-related losses from an ice storm in Toronto and severe flooding in the U.K. and Ireland in December are seen hurting 2013 results and “will be taken into consideration” in the board’s dividend decision in February, according to the statement.
–With assistance from Donal Griffin in Dublin. Editor: Simone Meier