Stephen Hester, the former Royal Bank of Scotland chief executive who is now running the UK general insurance giant RSA, has warned he will be slashing UK jobs as he aims to turn around the struggling operator of the More Than brand.
Mr Hester joined RSA in February after a controversial time at RBS marked by an uneasy relationship with Chancellor George Osborne. He said redundancies will form part of the £180m in cost savings he hopes to make over the next three years.
However, he also said RSA also expected to start paying a dividend again next year after a turbulent period which began in November when a black hole was discovered in its Irish business, prompting the departure of Mr Hester’s predecessor Simon Lee.
Mr Hester said the cuts would hit underperforming areas such as the UK and Ireland hardest but did not specify how many people would lose their job. He added: “There is much to do. There will be setbacks and the performance standards we aspire to will take some years to achieve. But a good start has been made. We are determined to deliver an RSA admired among international general insurers.”
RSA’s pre-tax profits fell from £250m at the middle of last year to £69m during the six months ending June 30. It suffered the impact of weather-related claims in the UK and Canada, while the Latin American business was hit by an earthquake in Chile in April. Restructuring costs reached £117m, including a £57m writedown in Ireland.
However, it is a vast improvement on the company’s troublesome second half of 2013, when the FTSE 100 giant slipped to a £494m loss. Over the past few months, Hester has launched a £747m rights issue, sold £591m of non-core businesses and scaled back its underwriting of unprofitable business in areas such as UK motor.
Barrie Cornes, analyst at Panmure Gordon, said: “The key point for us is that this will take time and in the meantime there are better investment opportunities.”
Black November: The £200m hole
RSA’s problems began to mount in November when the company announced it was suspending its three top executives in Ireland, pending an investigation into “issues” in its claims and finance divisions.
The accountancy firm PwC later found a £200m black hole in the operation, revealing that “inappropriate collaboration” between the subsidiary’s top bosses had undermined accounting controls. The group had already issued a profit warning earlier in November due to claims from the St Jude storm in the UK and flooding in Canada.