Stephen Hester launches £775m rights issue in RSA overhaul

 

Former Royal Bank of Scotland boss Stephen Hester announced his arrival at insurer RSA by axing its dividend and launching a £775 million rights issue.

In a wide-ranging overhaul of the group’s strategy, Hester said he also planned to sell £300 million worth of assets to plug a gaping capital shortfall he believes has been growing over the past 4-5 years.

RSA shares have fallen heavily since the discovery of a £200 million black hole in its Irish business last year, which led to the departure of former boss Simon Lee in December.

The More Than owner will now focus on the UK and Ireland, Canada, Scandinavia and Latin America, suggesting disposals in other parts of Europe and Asian are on the cards.

“It’s never fun delivering disappointing news but we want to make sure this business is cleaned up properly,” Hester said. “I have done this kind of thing a lot in my career.” 

As well as the planned fundraising, the company said it had also taken out a £550 million reinsurance contract with Warren Buffett’s Berkshire Hathaway to cover its liabilities.

It also plans to sell property and parts of its investment portfolio to boost its regulatory capital buffer by over £1 billion.

RSA posted a pre-tax loss of £244 million in 2013, compared to a £448 million profit last year and said it could not justify paying a dividend in light of the performance. It said its interim payout was likely to be “modest”.

Hester added: “RSA’s 2013 results are poor and we need to grasp the nettles of both underperformance and under-capitalisation. Together with a series of significant self-help measures, we believe this will put the group’s capital in the right place for the future.”

Barrie Cornes, analyst at Panmure, said: “We view the capital raise as an inevitable consequence of over distributing its dividend for the last few years in addition to the problems in Ireland.”

RSA shares fell almost 3 per cent to 99.2p.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific