Former Royal Bank of Scotland boss Stephen Hester yesterday begun a drive to raise up to £1.6 billion as he attempts to revive More Than-owner RSA.
Hester, who joined the insurer less than a month ago, revealed the extent of the group’s current woes by announcing that operating profits for 2013 had slumped to £286 million from £601m a year earlier.
The move to raise up to £1.6bn in capital will see RSA tap shareholders for about half of the cash – £775m – with the remainder coming from disposals and money saved by scrapping its dividend.
Chief executive Hester told investors: “RSA’s 2013 results are poor and we need to grasp the nettles of both underperformance and under-capitalisation.”
The firm has been hit by a series of profit warnings, an accounting scandal at its Irish arm and a surge in flood claims following the wettest winter on record.
Recent poor weather has continued to hamper the group’s recovery plans, with flooding in the UK and Ireland and ice storms in Canada likely to result in a claims hit of between £75m and £100m.
Hester said he expected the £775m rights issue to conclude in April, adding: “In deciding how much capital we thought we needed, we wanted to have enough cushion so that whatever banana skins show up in the next couple of years, we can withstand them.”
The firm said it had already started making disposals, targeting around £300m in 2014 and Hester added that more sales could follow in 2015.
In the UK, RSA made an underwriting profit of £36m as a result of a good performance in its property and household books, offset by losses in personal motor insurance.
In Ireland, the underwriting loss was £220m, reflecting the need for reserves strengthening and the impact of the irregularities within the Irish claims and finance functions.
Shore Capital analyst Eamonn Flanagan said: “There is no doubting the calibre of the new CEO, Stephen Hester, and his ability to drive RSA forward.”