Ireland’s biggest insurer RSA made a loss of €176.6 million in 2014 while also receiving a capital injection of €137 million from its UK parent, its latest filed accounts show.
These are a legacy of irregularities in its claims and finance functions and issues around bodily injury claims that arose in 2013 and resulted in three senior executives being suspended and litigation between the insurer and its former chief executive in Ireland, Philip Smith.
The capital injected into the Irish business by the RSA group last year brought the total to €399 million between 2013 and 2014.
In spite of this injection of funds, the directors have flagged that the company could have a capital shortfall on transition to the new Solvency II regulatory rules, which take effect on January 1st 2016.
The accounts state that in the absence of “capital management actions”the insurer would not have sufficient capital to meet its solvency requirements.
The directors state that the Irish subsidiary is “working closely” with the RSA group to “identify the most effective means of addressing the capital shortfall before the transition date and has identified a number of initiatives...with the potential to do so”.
The accounts for RSA Insurance Ireland Ltd also show that the company signed a reinsurance contract on February 18th with another part of the RSA group. The contract covers all claims occurring before October 1st 2014.
“All things being equal, had the contract been executed on or prior to December 31st, it would have increased the company’s coverage ratio under Solvency 1 [regulatory requirements] from 1.52 times the required minimum solvency margin to 2.19 times,” the directors state.
According to the accounts, RSA undertook a strategic review that produced a three-year business plan out to 2017. “The plan is designed to restore profitability and generate acceptable returns on capital for the group and its shareholders.”
While the losses incurred by RSA in Ireland last year were substantial, they did at least represent a reduction on the €234.7 million deficit posted in 2013.
Net premiums written reduced to €346.6 million from €365.1 million a year earlier. Its realised investment income reduced by €22.4 million due to a fall in dividend income from subsidiaries, and lower corporate and sovereign bond yields.
Claims incurred fell by 22 per cent to €394.7 million due a reduction in the strengthening of prior year reserves. The company incurred exceptional costs of €48.8 million relating to restructuring, remediation and the impairment of intangible assets, and booked an actuarial loss of €21.3 million on its pension scheme.
Costs associated with its voluntary redundancy programme amounted to €12.4 million last year compared with €2 million in 2013. Staff numbers during the year reduced to 474 from 532 previously.
In terms of future developments, the directors state that the company would align with RSA group strategy, focusing on “core markets, of which Ireland is one, capital and balance sheet strengthening and performance improvement”.
Earlier this year, Mr Smith was granted an award of €1.25 million by the Employment Appeals Tribunal in his constructive dismissal case against RSA. In June, RSA said it would appeal the award to the High Court.
