RSA chief quits as insurer warns on profit again

By Simon Jessop

RSA Insurance Chief Executive Simon Lee resigned after the insurer issued a third profit warning and flagged a possible hit to its dividend from a capital hole at its Irish business.

Chairman Martin Scicluna will step up to an executive role until Lee's replacement is appointed, Britain's largest general insurer said on Friday.

RSA said it had completed a review of RSA Insurance Ireland and would strengthen its reserves by 130 million pounds ($212 million) and inject 135 million pounds of capital into the division.

That, combined with 25 million pounds in claims after recent storms in Europe, would lead to a further reduction in anticipated 2013 earnings, the insurer said.

It said 2013 group return on equity would be in "mid-single-digit" territory.

RSA said these factors would be reflected when it meets to discuss the 2013 final dividend.

Lee's handling of a dividend cut in February had already upset investors.

Shares in RSA dropped nearly 20 percent when the market opened on Friday, putting them on course for their biggest daily fall since August 2002.

"The significant reserve strengthening in Ireland represents a further negative event and places additional strain on the capital metrics of the Group," said Scicluna.

RSA issued two profit warnings in November, the first reflecting the impact of severe weather in Europe and Canada and the second related to the issues at its Irish arm.

Scicluna said he is initiating a full review of the group's businesses with the aim of improving capital strength, optimising its business portfolio and delivering a sustainable dividend. An update on the review will be given at the company's full-year results presentation.

Last month the head of RSA's Irish operation resigned as the group launched an investigation into alleged irregularities and accounting issues at the business.

Shore Capital analyst Eamonn Flanagan said he expected the shares to be hit "with the last remaining 'prop' for the shares, namely the dividend, now likely to be materially weakened."

A significant drop in the shares could make RSA a takeover target, he said.

"Too strong a negative reaction is likely to deliver an opportunistic bid for the group, in our view". ($1 = 0.6125 British pounds)

(Editing by Erica Billingham)

Source: Reuters