13 December 2013
Last updated at 08:29 ET
RSA said it had seen an increase in motor injury claims
Shares in RSA Insurance Group fell 18% in early trading after the firm’s chief executive, Simon Lee, resigned amid deepening problems at its Irish unit.
RSA said he would leave the group with immediate effect.
Last month, RSA suspended the head of its Irish unit, Philip Smith, who later resigned, after alleged accounting irregularities were discovered.
RSA has now said the unit’s reserves will need to be strengthened by a further £130m.
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RSA Insurance Group
Last Updated at 13 Dec 2013, 09:35 ET
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The majority of this was to cover an increase in bodily injury claims in the motor insurance sector, it said.
“This is in addition to the £70m previously announced on 8 November relating to claims and finance issued in Ireland,” the firm said in a statement.
It added that strengthening its Irish reserves and last week’s storms in Europe would hit the group’s earnings for this year and possibly reduce dividends.
“We now expect mid-single digit group return on equity in 2013,” it said.
RSA told the BBC that the insurance industry as a whole in Ireland had recently seen an increase in compensation claims for injuries such as whiplash sustained in car accidents, but could not say whether such claims were legitimate or fraudulent.
Andrew Bailey, chief executive of the UK’s Prudential Regulation Authority (PRA), stressed that there was no need for RSA policyholders to be concerned.
He told the BBC: “We’re watching the firm very closely, the board is watching the firm very closely. You can see the board is taking action. There’s no threat to RSA policyholders.”
RSA, which owns the More Than brand, said that until it could find a permanent replacement for Mr Lee, Martin Scicluna would become executive chairman.
Mr Scicluna said Mr Lee had “felt it was in the best interests of the group that he step down to enable a change in leadership”.
The problems in Ireland were discovered after a routine audit, but RSA has not given details about what happened.
Mr Lee said last month that RSA was “extremely disappointed with the issues which have been identified and their financial impact on the group”.
But he maintained that the problems were “isolated to the Irish business” and that “no policyholders have been affected”.
Analyst Eamonn Flanagan of Shore Capital said that the share price fall could make RSA vulnerable to a takeover bid.
“Too strong a negative reaction is likely to deliver an opportunistic bid for the group, in our view,” he added.