RSA’s boss has revealed the secret of the firm’s success: the 2013 crisis that led to nearly a third being wiped off its market capitalisation.
The insurer today beat market expectations with its 2016 results after a year that has seen the firm’s share price increase by 40 per cent already, with shares advancing five per cent in today’s trading.
In 2014, Stephen Hester was parachuted in to lead the business with a remit to execute a painful restructuring in the wake of the crisis that included a £200m accounting black hole in its Irish division and three profit warnings within six weeks.
“Sometimes a crisis shakes up a company and allows you to unleash an amount of change, in the spirit of determination, in the way that business as usual doesn’t,” Hester told City A.M.
If you use a crisis well, you can sometimes get extra momentum out of it. We used RSA’s crisis of 2013 to make far more sweeping and comprehensive changes in the last three years that we might otherwise have done.
Making it better
“I don’t think we're turning round the company anymore. We’re just making it better,” said Hester.
Over the next year, the firm will focus internally with no M&A aspirations, the former RBS boss said. This is not least because the insurance sector faces a number of hurdles in the near term.
Hester said: “We’re planning on the outside world giving us no help.” He cited slow growth, low interest rates and increased competition in the insurance industry as potential obstacles.
And in the wake of the recent successive hikes in insurance premium tax within government Budgets and Autumn Statements, he added: “And the odd strange government ruling that taxes us more.”