RSA CEO Sees Emerging Market Potential, Amid Asset Sale Talk

RSA Insurance Group Plc (RSA) Chief Executive Officer Simon Lee said the insurer has further growth potential in emerging markets and maintains a “robust” capital position, amid speculation it may sell assets.

Lee, who this month injected 100 million euros ($135 million) into RSA’s Irish unit and suspended three local executives following an investigation into accounting practices, said at a conference in London that insurers need to chose markets that offer the best prospects for profitable growth.

Given the economic backdrop in Europe, “it’s only natural that we continue to look further south and further east towards some of the emerging markets,” he said at the Future of General Insurance conference in London today. “Half of all general insurance premiums growth is going to come in the next decade from Latin America and emerging Asia.”

RSA, Britain’s biggest non-life insurer, operates in 32 countries across Europe, Asia, Latin America, Canada and the Middle East and has made more than 60 acquisitions in eight years. The Financial Times reported last week that RSA is considering selling some international units to bolster its balance sheet, which may include its Latin American operations.

Speaking after the conference, Lee declined to comment on the “media speculation” but reiterated that RSA’s economic capital position is “robust.”

Credit Watch

Standard & Poor’s cut RSA’s credit rating to A from A+ last week and said it may downgrade further after the investigation in Ireland prompted the insurer to say that it won’t meet its profit targets twice in a week.

Sanford C. Bernstein yesterday said there was “plausible risk” the company will be downgraded to A- within 90 days, adding that management should strive to safeguard its rating which could include disposing of “non-core” assets.

“RSA should sell parts or all of its Asian franchise,” wrote London-based analyst Thomas Seidl in the note to clients, with an outperform rating on the shares. “RSA could fetch at least 100 to 200 million pounds for these assets and the disposal would greatly simplify the group structure and reduce required capital for premium written by these non-core entities.”

Lee, 52, declined to comment on the analyst report today and said he isn’t too concerned that there will be another downgrade, adding that the company had operated with an A minus rating in the past.

RSA’s shares have tumbled 19 percent this year, erasing about 860 million pounds off its market value.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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