Shares in RSA Insurance Group, Britain’s biggest non-life insurer, fell by up to 16 per cent this morning as markets reacted to the suspension of three senior executives at its Irish operation.
Last week the insurer said its full-year operating result will be £70 million (€90 million) lower than analysts estimates after it had to inject additional capital into its Irish division.
RSA confirmed last night it has appointed PricewaterhouseCoopers (PwC) to undertake a review of the financial controls within its Irish operation, following the suspension last week of three top executives over alleged financial irregularities.
RSA, the country’s largest general insurer and owner of 123.ie, said it had hired PwC to “undertake a comprehensive review of the issues identified last week”, a reference to the discovery of a capital shortfall that necessitated a €100 million injection into the Irish operation by the UK parent.
“The review will focus on the financial and regulatory reporting processes and controls within the Irish business, and the group oversight and controls of the Irish business,” said RSA.
Remedial actions
PwC, which will also examine the "remedial actions" undertaken by the group since the issue came to light, will report back to the UK parent company "by the end of the year".
The Irish operation's chief executive Philip Smith, chief financial officer Rory O'Connor and claims director Peter Burke were all suspended last week following the discovery of the capital shortfall, pending an investigation. No findings have been made against any individual.
It was speculated by industry sources this weekend that the issue surrounding the capital shortfall is related to alleged underprovisioning for large claims, or late provisioning, which would have the effect of artificially boosting trading performance at the expense of its reserves.
RSA said it uncovered problems in recent weeks following a routine audit of its Irish operations, although a weekend newspaper report speculated that the Central Bank had become aware of problems at RSA months ago.
The company told investors last Friday that the problems in the Irish unit would knock about £70 million, or 15 per cent, off its group profits.
Separately, it said last week it was setting aside up to £140 million to cover increased motor claims in Ireland.
In a statement last night, group chief executive Simon Lee said the company was "extremely disappointed" by the issues identified.
“I am confident that these issues are isolated to the Irish business . . . No policyholders have been affected and all our Irish businesses continue to operate as normal,” he said.
He said that while the issues identified were “serious” they would not have any long-term material impact on the group.
Additional reporting Bloomberg
