Financial News

  • 17 December 2013, 8:01

RSA Slumps Further Amid Downgrade Rumours

Shares in insurance giant RSA have fallen by a further 2.5% during early trading on Monday, amid rumours of a possible credit rating downgrade.

The slump comes after its chief executive Simon Lee quit in wake of the company's Irish crisis, as well as the company's third profit warning in less than six weeks.

On Friday, the FTSE 100 company, which owns More Than and has more than 20 million customers worldwide, announced it will need to strengthen reserves by some £130m, on top of the £70m "black hole" uncovered during a routine internal audit last month.

The announcement comes amid an ongoing review of RSA's Irish business amid fears of inadequate bookkeeping systems.

Auditor PwC is expected to file its report next month.

RSA chairman Martin Scicluna previously said the company remained a "leading insurance brand" and insisted the outlook was more positive for 2014.

However, the business has warned it expects to pay out up to £25m after a surge in claims for damage caused by severe weather that battered the UK and Scandinavia earlier this month.

The losses, coupled with the issues identified in RSA's Irish division, prompted Standard and Poor's to cut its credit rating to A and place the company on so-called "CreditWatch".

Moody's, whose A2 rating has stood since December 2008, says the outlook for the company is "stable" but warned: "The reduced level of profitability (from recent announcements) are credit negative for RSA."

Mr Scicluna said: "We have enviable market positions across the globe and attractive businesses with healthy underlying profitability.

"We have deep expertise and capability across our management team.

"The board and I are confident that RSA will re-emerge as a stronger group in 2014."

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