RSA trimmed its shareholder payout by a third in February and, after storms in Europe and irregularities in its Irish business, it has signalled the possibility of further cuts following today's profit warning, its third in six weeks.
Stockbroker Panmure Gordon forecasts that the dividend will be slashed by 30% with earnings 35% below previous targets.
The news coincided with the resignation of chief executive officer (CEO) Simon Lee from the home, motor and marine insurer. He leaves the group immediately after two years in the post following troubles in its Irish operations concerning increases in injury claims in its motor business.
The group will inject £135 million into RSA Insurance Ireland to ensure its solvency ratio – the size of its cash compared to its potential claims – remains above 200%.
Last month (8 Nov) the group estimated its problems in Ireland would hit its income by £70 million this year. The conclusion of a report by business services group PwC into its problems takes this figure through the £200 million barrier.
Until a new CEO is appointed, duties will be undertaken by non-executive chairman Martin Scicluna. The recruitment process is anticipated to take several months.
Panmure Gordon believes this could be the start of a breakup of the group. ‘Whilst we expect to see significant downward pressure on the share price today we would highlight that there is a good possibility that the business will come on the radar screens of predator’s looking to acquire some of its better performing business from what is likely to be a distressed seller,' says analyst Barrie Cornes who believe RSA's emerging markets business, Canadian and Scandinavian operations would attract particular attention.