RSA CEO Awaits Irish Fine Following Accounting ScandalSarah Jones
RSA Insurance Group Plc Chief Executive Officer Stephen Hester said the company’s Irish unit will likely be fined following its accounting scandal last year.
“There will be some sort of Irish regulatory action in the summer,” Hester, 53, said in an interview in London on July 15. “I don’t expect the fine will be a headline-making one.”
Hester joined the insurer in February after an accounting scandal, three profit warnings and a 200 million-pound ($342 million) capital injection in Ireland cost CEO Simon Lee his job. He has since overseen a 775 million rights issue and scrapped the company’s dividend to clean up the balance sheet.
While the Irish division had “significant” losses in the year’s first half, the CEO said the unit will remain part of the group as it seeks to divest other assets. Ireland is seen as one of RSA’s core markets along with the U.K., Scandinavia and Latin America, Hester said.
The insurer expects to report further “clean-up” charges in 2014 from the Irish scandal that Hester had previously referred to as an “ugly banana skin.” He hired Ken Norgrove from Zurich Insurance Group AG to head the Irish unit.
“The tidy up of Ireland has gone into the first half,” said Hester. “There is nothing wrong with Ireland in the longer term and I see no reason why Ireland can’t in two or three years time be making its cost of capital.”
Norgrove replaced Philip Smith, who resigned in November saying he was made a “fall guy” amid an investigation into the firm’s accounting practices. The unit’s Chief Financial Officer Rory O’Connor and Claims Director Peter Burke were later fired after a probe found that some executives had made reports that were “inaccurate and potentially misleading.”
Hester, who was previously CEO of Royal Bank of Scotland Group Plc, said both the regulators and the police have access to company files but declined to comment further.