Simon Lee, the chief executive officer of RSA Insurance Group, announced his resignation this morning as the UK insurer pledged to inject £135 million (€160.4m) into its beleaguered Irish operation.
The move follows the resignation last month of Philip Smith, the CEO of RSAInsurance Ireland, Ireland's biggest insurance grup, after financial irregularities were discovered in the Irish arm.
In an announcement to the London Stock Exchange this morning, RSA said that Irish reserves will need to be strengthened by £130m, the majority of which relates to bodily injury strengthening in motor and liability lines. This is in addition to the £70 m previously announced on November 8th relating to claims and finance issues in Ireland.
As such, RSA will inject £135m of capital into RSA Insurance Ireland today to ensure that its solvency ratio is maintained above 200 per cent, in excess of the 150 per cent level required. Bloomberg this morning quoted a Central Bank spokeswoman as saying that the regulator remains “in close and regular dialogue” with the Irish based insurer.
The PwC review of the issues raised in Ireland is ongoing and PwC is expected to report back to the Group Board in January when its findings will be announced.
According to the group, the impact of this Irish reserve strengthening, as well as storms experienced in Europe last week, will lead to a further reduction in anticipated 2013 earnings.
“We now expect mid-single digit Group return on equity in 2013.”
Mr Lee will stand down from the board and leave the group with "immediate effect". Until a permanent replacement can be found, the board has asked Martin Scicluna, to become executive chairman. Mr Lee will receive a £824,000 payment in lieu of twelve months' notice, paid monthly and set off against any payments he receives for any future employment or appointment he accepts in the next twelve months. He will not be entitled to any bonus payments in respect of the 2013 or 2014 performance periods.
Martin Scicluna, RSA Chairman said: “Simon felt it was in the best interests of the Group that he step down to enable a change in leadership. He has offered to help in any way that he can to ensure a smooth transition.”
With regards to the significant reserve strengthening in Ireland, Mr Scicluna said that it represents a “further negative event and places additional strain on the capital metrics of the group”.
“The impact of this reserve strengthening, alongside the extreme weather in 2013 and the effect of financial irregularities in Ireland will be taken into consideration in the board’s dividend decision in February. I am initiating a full review of the group’s businesses with the objectives of improving the capital strength of the group, optimising the group’s business portfolio and delivering a sustainable dividend into the future. We will update on the progress of this review at our full year results presentation.”
In early November, the company, which also operates the 123.ie brand, suspended three senior executives, chief executive Philip Smith, chief financial officer Rory O’Connor and claims director Peter Burke, pending the outcome of an investigation into issues involving its Irish claims and finance functions.
