Struggling non-life insurer RSA (RSA) rises for the second day in a row following news yesterday afternoon that former Royal Bank of Scotland (RBS) boss Stephen Hester is its new chief executive officer. Today's advance takes the shares up 5% to 103.9p
He takes up the role immediately and has a large in-tray to tackle, especially as the insurer had to inject £200 million into its Ireland business after a routine audit uncovered a scandal where premiums were overstated while claims were understated. Several profit warnings and hints that the dividend would be cut followed, which led to chief executive Simon Lee stepping-down in December.
Analysts estimate that RSA needs to raise at least £500 million to fill a hole in its balance sheet and Hester’s first task is to prepare for the unveiling of the group’s new earnings and capital position strategy at the end of the month (27 Feb). This could signal a series of disposals or a rights issue.
Hester will be paid £950,000 a year while his bonus could see his income rise by 160% (£1.5 million). He also receives shares worth 300% of his salary as a signing-on fee.
The new boss’ five-year term at the part state-owned bank came to an end in September following rumours of disagreements with the government on the direction of the lender. This is his first insurance role in his 30-year career, which has spanned property and financial services companies.
A shareholder quoted in the Financial Times says Hester is a 'bigger name' than expected for the top job.