UK insurer RSA has confirmed it’ll launch a £775m rights issue to bolster its capital position.
Following the £200m fraud scandal in its Irish business at the end of last year, former RBS chief executive Stephen Hester (pictured) has been working to move the besieged firm forward.
Hester said this morning that the firm’s 2013 results are “poor” and it needs to “grasp the nettles of both underperformance and undercapitalisation”.
Loss before tax was £338m in 2013, three per cent more than in 2012.
Basic earnings per share were down 9.8p in the year, after earnings of 8.8p per share in 2012.
The plan to shore up its balance sheet comes as part of a wider plan. In the statement this morning, RSA detailed the plan as:
- UK & Ireland, Canada, Scandinavia and Latin America to form core of the Group going forward
- Extensive business improvement plans in train focused on portfolio actions and expense efficiency
- Certain disposal processes have already commenced targeting c.£300m proceeds in 2014
- Capital actions to reduce equity and property exposure and execute new reinsurance structures complete
- Independent review of reserves complete. Conclusion that reserves are in a reasonable range
- Our own assessment of margin in reserves at 31/12/13 is 5.0 per cent
- Proposed rights issue to be launched with the aim of raising £775m
- Impact of 2013 results means final dividend cannot be justified
Together with a series of significant ‘self-help’ measures, we believe [the rights issue] will put the Group’s capital in the right place for the future. It will give us the necessary platform to focus aggressively on tightening strategy, improving customer service in core businesses and delivering operational improvements; and from these actions deliver attractive returns on a stronger tangible equity base.