25th Mar 2014 15:53
LONDON (Alliance News) - RSA Insurance Group PLC Tuesday launched a GBP773.0 million fully-underwritten, discounted rights issue in order to shore up its balance sheet, as Chief Executive Stephen Hester's recovery plan for the troubled FTSE 100 insurer begins to take shape.
RSA, which has battled with increased claims costs and an accounting scandal in its Ireland business, is offering three shares for every eight owned by current shareholders at 56.0 pence each, a 40% discount to Monday's closing price. RSA shares were Tuesday quoted at 95.45 pence, up 2.3%.
The rights issue is fully-underwritten by Bank of America Merrill Lynch and J.P. Morgan Cazenove, and will raise GBP748.0 million net of expenses.
The net proceeds will be held as cash or low-risk investments in order to improve RSA's capital strength and surplus over its capital requirements.
Hester said the rights issue will enable RSA to restore its capital position and carry out its plans without the risk of being forced into "suboptimal decisions" as a result of capital shortage or instability.
The intention to launch a rights issue was unveiled with RSA's preliminary results on February 27, when the insurer scrapped its dividend and reported a GBP244 million pretax loss and unveiled the rights deal alongside a package of other measures intended to return its balance sheet to health.
On Tuesday, RSA said its core businesses remain "competitively strong and capable of good performance."
According to the prospectus for the rights issue, RSA said it injected GBP40.0 million into its Ireland business on March 7, as outlined in its full-year results, on top of the GBP220 million injected in 2013.
According to page 107 of the prospectus, the insurer hasn't ruled out injecting more capital into its Irish business.
"Further, if and to the extent that the group?s Irish subsidiary strengthens its reserves as part of the preparation of its statutory accounts for FY 2013, the group may inject additional capital into the Irish subsidiary," the prospectus reads.
RSA is trying to return the subsidiary to profitability, having appointed Ken Norgrove as the chief executive of that business on March 7.
By Samuel Agini; [email protected]; @samuelagini
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
RSA.L