RSA in talks with regulator over solvency of life arm
Friday 07 March 2003
Royal & SunAlliance, the insurer struggling to fill a £700m shortfall in its capital requirements, revealed yesterday it was locked in negotiations with the Financial Services Authority (FSA) over the solvency of its life insurance businesses.
The news came as RSA reported annual results and confirmed a widely anticipated dividend cut. Its operating profits for the year came in at the bottom end of expectations at £226m, and the dividend was reduced by 63 per cent to 6p a share.
RSA admitted yesterday the FSA had concerns over the re-insurance deals and future profits used to meet the solvency requirements of its life funds, which were closed in November. The insurer said the discussions may result in the need for additional funding from the group.
The company may also be in line for a fine and compensation payouts for mis-selling mortgage endowments. RSA was slapped with a record fine of £1.35m for mis-selling personal pensions last year.
Further regulatory costs are possible from its significant book of guaranteed annuity options. The company has failed to reach a settlement with the FSA on these contracts, which amount to liabilities of more than £1bn, after months of talks.
Similar liabilities crippled Equitable Life, and RSA may have to compensate policyholders. The company said these "discussions could result in significant financial consequences for the group, including the provision of further financial support for subsidiaries".
The company's two with-profits funds already have a loan facility of up to £1bn from the group to help it meet its solvency margins. Bob Gunn, the acting chief executive of the company, said RSA had provisions in place to cover any regulatory costs arising in the life funds.
RSA's capital shortfall has arisen from losses on the World Trade Centre attacks, flooding and asbestosis. Adding to the group's capital problems is its staff pension fund, which was revealed as having a £400m deficit yesterday. Staff are being asked to start contributing to the scheme, and RSA is planning a £70m injection this year.
The group is in the middle of a disposal programme, announced in November, that will see 12,000 jobs shed and the company focus on general insurance.
Mr Gunn yesterday said disposal plans were progressing well, including the float of its Australian business, but said the company "still had work to do". He added: "We have steadied the ship, although we are not in a safe harbour yet."
Andy Haste, the chief executive of Axa Sun Life, is taking over from Mr Gunn in April.
Insurers across Europe have been hit by similar problems. Aegon reported a 35 per cent drop in profits for the year, and cut its dividend by 11 per cent. Swiss Life, which staged a 1.2bn Swiss francs (£560m) rescue rights issue last year, posted a record loss of Sfr1.7bn for 2002 yesterday.
Board creates magnetic field to achieve lift
Follow the latest events from this Champions League fixture
Like Madonna, Sister Cristina Scuccia's video is also set in Venice
Singer says the track was 'force-fed down people's throats'
techThe original free dating app will remain the same, developers say
- 1 Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
- 2 Banksy arrest hoax: Internet duped by fake online report claiming artist's identity has been revealed
- 3 Drink alcohol and eat meat to improve male fertility - but cut down on coffee, studies suggest
- 4 Former East 17 frontman Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
- 5 The inventor of the Facebook 'like' button says he never made a 'dislike' button because he feared the 'unfortunate consequences'
Ukraine crisis: Donetsk 'tactical missile' explosion at factory sends blast wave across rebel-held city
Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
Oscar de la Renta dead: Legendary US fashion designer dies after long cancer battle aged 82
Banksy arrest hoax: Internet duped by fake online report claiming artist's identity has been revealed
Super-sized ships arrive in Britain: How big can they get?
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
London bus driver 'kicks gay couple off for kissing'
Lord Freud: Tory welfare minister apologises after saying disabled people are 'not worth’ the minimum wage
Lord Freud hangs on as MPs of all parties 'call for his head' over disability comments
iJobs Money & Business
£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...
£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...
£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...
£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....