LONDON, Feb 5 (Reuters) - 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 shareholders.
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 November.
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)