The shares of RSA Insurance (LSE: RSA) slumped 18p, or 15%, to 103p during early trade this morning after the FTSE 100 member said “issues” within its Irish subsidiary would mean its 2013 operating profits would be £70m below current market expectations.
RSA reported a £684m operating profit during 2012 and City brokers had been expecting a figure in excess of £600m for this year.
The blue chip admitted a “routine” internal audit had unearthed the issues and that the Irish subsidiary’s chief executive, chief financial officer and claims director had all been suspended.
The group also confirmed it had appointed PwC to undertake a “comprehensive review” of the Irish division, and had injected extra capital into the unit to ensure its solvency ratio exceeded 200%.
Simon Lee, the chief executive of RSA, said:
“We are extremely disappointed with the issues which have been identified and their financial impact on the Group. Whilst the investigation is ongoing, I am confident that these issues are isolated to the Irish business. No policyholders have been affected and all our Irish businesses continue to operate as normal.“
“Whilst these issues are serious, they do not have a material, long-term impact on the Group. Our capital position remains robust and we remain committed to our dividend policy which is aligned with market expectations for the full year final 2013 dividend.“
RSA’s trailing dividend is 6.18p per share, with brokers up until last week predicting a 6.28p per share payout for 2013.
Those projections currently place the shares on a possible income of 6%.