Regulators are probing the Irish arm of RSA after the FTSE 100 insurer warned of problems that have led it to suspend three senior managers and issue a second profit warning within a week.
After the market closed on Friday, RSA disclosed it had uncovered “issues” in the “claims and finance functions” of its Irish business, which the group had shored up with fresh capital.
RSA did not specify the nature of the difficulties but said they were likely to knock another £70m, or 15 per cent, off the operating profits of the UK’s biggest listed non-life insurer this year.
Investors were left bracing themselves for another big fall in the share price on Monday morning after a previous profit warning on Tuesday caused it to drop as much as 8 per cent.
The latest warning will heighten talk among bankers that the insurer is vulnerable to a takeover bid and put further pressure on the group’s chief executive.
Leading RSA shareholders told the Financial Times this week that the first profit warning raised more questions about the future of Simon Lee, whose handling of a dividend cut in February had already upset some institutional investors.
RSA blamed the first profit warning on bad weather, as well as a need to strengthen reserves at its motor insurance business in Ireland because of a rise in injury claims.
However, on Friday night RSA cautioned that the new problems in Ireland, which came to light “during a routine internal audit”, were separate to those it previously disclosed.
RSA’s Ireland arm has suspended Philip Smith, chief executive; Rory O’Connor, finance director; and Peter Burke, claims director, “pending the outcome of an investigation”.
The Central Bank of Ireland said its regulators had reviewed the terms of reference of the investigation and that it was in “close dialogue” with RSA. The UK’s Prudential Regulation Authority has also been informed.
“No findings have been made against any individuals at this time,” RSA said. It added: “No policyholders have been affected and all our Irish businesses continue to operate as normal.”
The Irish business is a relatively small part of RSA, accounting for only about 4 per cent of the premiums the group writes.
Even so, RSA has more than 800,000 customers and employs 850 people in the country and calls itself the “largest and fastest growing” insurance company in the republic.
It sells both commercial and personal insurance in Ireland and operates 123.ie, a well known brand which it bought in 2010.
RSA has identified the country has among its “most competitive markets”, although the business has enjoyed higher levels of profitability in Ireland than it has in the UK.
It emerged this week that the group had put aside £140m worth of reserves for the motor insurance operation in Ireland, the same as the value of premiums it wrote last year.
The insurer said on Friday that it had injected fresh capital into the Irish business to strengthen its solvency ratio.
RSA has appointed senior executives from elsewhere in the group as temporary replacements for the three it has suspended. They will be led by Adrian Brown, who runs RSA’s UK and western Europe division.
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