Global non-life insurer RSA (RSA) drops 2.4% to 98.25p after what could be construed as its fourth profit warning since November. It has suffered further weather losses in Canada, UK and Ireland and says these will impact full-year earnings for 2013, albeit it is too early to quantify the scale of losses.
Analysts reckon this raises the risk that its dividend will be cut or even suspended when results are published in February.
Stockbroker Panmure Gordon says the big issue is how RSA will improve its regulatory capital position. It suggests that the insurer will 'try to sell some of the family silver' to avoid a rights issue in excess of £500 million.
The shock news comes as RSA concludes an investigation into its troubled Irish business blamed the men in charge for its huge losses.
A routine audit at RSA Ireland in November uncovered financial and claims irregularities, which led the group having to inject £200 million into the business.
A PwC-led review published today concluded that a small number of senior executives in Ireland intentionally circumvented the governance system so that ‘financial records did not fully reflect the financial position of the business and reports made to group and regional management were inaccurate and potentially misleading’.
The report also concluded that the problems are limited to Ireland that the financial impact on the group will be £200 million, as expected.
Philip Smith, boss of the Irish business, resigned after the story broke, while finance chief Rory O’Connor and claims director Peter Burke were fired yesterday (8 January).
The news of troubles in the division led to three profit warnings in six weeks in 2013 and group CEO Simon Lee stepping down last month.
Analysts at Berenberg and Panmure Gordon believe that RSA’s recent woes could make it a potential takeover target - for the whole company to be bought or broken up.