Ireland chief executive suspended after claims and finance ‘issues’ discovered
Regulators are investigating RSA Ireland after it discovered “issues” in the claims and finance functions that will wipe £70m ($112.13m) off its operating profit.
RSA announced after markets closed on Friday that it had suspended chief executive Philip Smith, chief financial officer Rory O’Connor and claims director Peter Burke after a routine internal audit found the issues.
RSA said its 2013 operating result would be £70m lower than market expectations as a result.
It has injected capital into RSA Insurance Ireland to make sure its solvency ratio is comfortably above 200%, the benchmark ratio set by Ireland’s central bank.
Ireland’s central bank is investigating the matter. No findings have been made against any individuals at this time.
Group chief executive Simon Lee said: “We are extremely disappointed with the issues that have been identified and their financial impact on the group.
“While these issues are serious, they do not have a material, long-term impact on the group. Our capital position remains robust and we remain committed to our dividend policy which is aligned with market expectations for the full-year final 2013 dividend.”
Lee said he was confident the issues were isolated to the Irish business and that the business would operate as normal during the investigation.
UK and western Europe chief executive Adrian Brown has been appointed acting Ireland chief executive. Group chief accountant Chris Rash is acting chief financial officer and UK and western Europe claims director David Pitt has taken over operational leadership of the Irish claims function.
RSA has also appointed PwC to conduct an independent review of its financial and regulatory reporting, controls within the Irish business, and group oversight and controls of Ireland. It will also assess adequacy of the remedial actions RSA is taking. It will report to the board before the end of the year.
Friday’s announcement was the second profit warning RSA issued last week. On Tuesday it warned full-year weather losses would be “materially above planning assumptions” and that it expected a return on equity of less than 10% as a result of storm losses.
The claims and financial issues are separate from the need to increase injury reserves in Ireland which the firm announced on Tuesday.