Insurer RSA faces sale of family silver to protect credit rating
By Chris Vellacott
LONDON (Reuters) - Troubled insurer RSA (RSA.L: Quote) may have to sell its best assets, leaving it concentrated in slow-growing markets such as its British home patch, to raise up to 1 billion pounds ($1.6 billion) and safeguard its credit ratings.
RSA said on Friday that it needed to boost capital and may have to cut its dividend following three profit warnings and a move to strengthen reserves at its Irish business, where it suspects accounting irregularities.
Some analysts estimate Britain's biggest non-life insurer, which owns the More Than brand, may need to raise as much as 1 billion pounds.
RSA Chairman Martin Scicluna is under pressure to outline a recovery plan to avoid downgrades to the company's credit ratings, a move that could deter insurance brokers from recommending its products such as car and home insurance.
Ratings agency Fitch on Monday put RSA's Insurer Financial Strength (IFS) rating of 'A' on Rating Watch Negative, indicating it is considering a downgrade.
Selling trophy assets in overseas markets, where RSA makes two thirds of its revenue, could be its least worst option.
Investors who have seen their shares fall 28 percent since the start of this year are unlikely to back a rights issue and analysts say the company is worth less than the sum of its constituent businesses, making the prospect of a full takeover remote.
"The key thing is that if there is a capital shortfall, shareholders will be unwilling to plug it with a rights issue," said one institutional RSA shareholder on Monday. Continued...