INSURER RSA has launched an independent review of its Irish business after uncovering problems that led it to issue a second profit warning and suspend three of its top managers last week.
Investors were steeling themselves for a share price fall today after the FTSE 100 firm revealed after markets closed on Friday that it had uncovered “issues” in the Irish “claims and finance functions” during a routine audit. RSA did not give details of the problems but warned that full-year operating profits were likely to be £70m lower as a result.
In a statement yesterday chief executive Simon Lee said the group has appointed accountancy firm PwC to carry out a comprehensive review of the business.
Lee also sought to reassure nervous investors that the issues, while serious, would 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.
The company has had to inject capital into RSA Insurance Ireland to ensure its solvency ratio is comfortably in excess of 200 per cent, the benchmark ratio set by Ireland’s central bank.
PwC’s review will focus on its Irish processes and controls as well as group controls of the Irish business. The accountancy firm will also assess the actions taken by RSA to address the problems and suggest any further actions needed to be taken, a spokesperson said last night.
PwC is expected to report back to RSA’s board by the end of the year.
Lee, who is meeting with analysts and shareholders this week, is likely to come under further pressure after he upset investors by slashing the dividend in February.
Friday’s announcement was also the second profit warning in a week after the company warned last Tuesday that claims following bad weather would leave it nursing a hit of between £45m to £65m.