Insurance giant RSA (RSA) plummets 11% to 107.5p after issuing its second profit warning in less than a week.
This is latest in a series of bad news from the FTSE 100 member following a hit from severe weather conditions in Europe and Canada as well as cutting its dividend earlier in the year (20 Feb).
RSA said after Friday's market close (8 Nov) that pre-tax profits are expected to be £70 million below forecasts due to problems in its Irish claims and finance business. It is yet to confirm the nature of the issue, but it noted in its trading update last week (5 Nov) a rise in the severity and increase in injury claims on its motor polices.
The issue is not only serious enough to hit the group’s profits this year but has also led to the suspension of Philip Smith, the chief executive officer (CEO) of RSA Ireland, and emergency capital has been injected into the business.
Smith has been replaced by acting CEO Adrian Brown, the group’s head of UK and Western Europe operations. The Irish region's chief financial officer Rory O'Connor and claims director Peter Burke have also been suspended following the outcome of an investigation by accounting firm PwC into its Irish business, the findings of which are expected next month.
The undisclosed problems are believed to have been found during a routine audit of the books. The group has moved to assure investors that matters are limited to Ireland and do not affect the rest of the group. RSA Ireland represents 2%, or £350 million, of the group’s liabilities.
Last Tuesday (5 Nov) RSA fell 7.5% to 119.4p as it braced itself for a rise in claims following storms across the UK and floods in Europe and Northern Canada.
Panmure Gordon analyst Barrie Cornes reckons the dividend is under threat, despite reassurances from the insurer.