LONDON Feb 5 Shares in crisis-hit insurer RSA
rose sharply on Wednesday as the appointment of former
Royal Bank of Scotland boss Stephen Hester as chief
executive raised hopes for its turnaround prospects.
RSA, which is considering selling some of its businesses to
plug a 200 million pound ($326 million) gap in its finances
uncovered last year following an accounting scandal at its Irish
arm, announced the appointment of Hester late on Tuesday.
Hester, a one-time investment banker, has built a reputation
since the 2008 financial crisis as a troubleshooter and has been
praised by the British government and investors for helping
salvage RBS by slashing assets and costs.
"Hester is definitely a good appointment, but he's going to
have to make some tough decisions as the capital shortfall must
still be made up," said one of RSA's top 40 institutional
He starts in the new role immediately and is likely to make
his presence felt quickly when RSA publishes its 2013 earnings
and the result of a strategic review, likely to identify assets
up for sale and a cut to the dividend.
Analysts at Barclays said they expect him to quickly unveil
a credible restructuring plan.
The insurer had been looking for a new CEO since the
departure of Simon Lee in December following a series of three
profit warnings, sparked by the Irish issues and high claims
costs related to extreme weather in Canada and Europe.
RSA shares were up 5.3 percent at 104.10 pence by mid
morning on Wednesday, making it the best-performing FTSE 100
stock in percentage terms. The stock rose as high as
106.7p, its highest in two months, and trading volume reached
112 percent of its 90-day average in the first hour of trading.
However, the shares remain around a fifth lower than where
they were trading prior to the first profit warning in early
Analysts also noted Hester's track record at RBS, which he
ran after its 45 billion pound government rescue during the 2008
financial crisis and shed 900 billion pounds of non-core assets,
and said his appointment lessened the chance of a fire sale.
"Disposals are equally likely, but this time with someone as
formidable as Hester as vendor, we suspect that the exit
valuations have increased considerably," said Shore Capital
insurance industry analyst Eamonn Flanagan in a note.
($1 = 0.6137 British pounds)
(Editing by Tommy Wilkes and David Holmes)