The decision to appoint Stephen Hester as RSA Insurance boss has reduced the likelihood of a takeover of the troubled group and a fire sale of any its assets, analysts claimed today.
The former Royal Bank of Scotland chief executive was last night handed the task of salvaging RSA’s reputation following the discovery of a £200 million black hole in its accounts last year.
His arrival — which takes place with immediate effect — has already been heralded across the Square Mile and led to RSA’s shares today gaining almost 6 per cent to 104.9p, making it the biggest riser in the FTSE 100.
Analysts said the company is now likely to scrap its dividend when it reports later this month and announces the results of a strategic review of its operations.
Others have gone as far as suggesting a rights issue is now on the cards as well as the sale of units in either Canada, Latin America and Scandinavia.
Eamonn Flanagan at Shore Capital said: “Disposals are likely, but this time with someone as formidable as Hester as vendor, we suspect that the exit valuations have increased considerably.
“At the same time, we do not believe he is seeking a short term role, hence any ‘for sale’ sign that hung over the group is there no longer.”
Hester will earn an annual salary of £950,000 plus a bonus worth up to 80% of that and long-term incentives worth millions more if he is successful in restoring RSA’s fortunes.
Under the leadership of its former chief executive, Andy Haste, RSA gained a reputation as one of the most reliable companies on the London Stock Exchange.
However, the group did not fare as well under his successor Simon Lee, who took over from Haste in 2011 but left the insurer in December following its third profits warning in six weeks. RSA was later forced to fire two executives in Ireland after accountancy firm PwC found that “inappropriate collaboration” between its subsidiary’s top bosses had undermined accounting controls.
One institutional shareholder, Chris White, the head of UK Equities at Premier Asset Management, said: “The appointment of Stephen Hester is a bit of a coup for RSA.
“After a string of profit warnings, investors will take some reassurance from the company’s ability to attract such a big name to the post.”