By Chris Vellacott
LONDON Jan 9 British insurer RSA blamed a handful of executives for accounting irregularities at its Irish division, attempting to draw a line under a scandal that left it with a 200 million pound ($329 million) hole in its finances.
The company has fired two executives, it said on Thursday, adding to the resignations of Philip Smith, the head of the Irish business, and group CEO Simon Lee late last year because of the scandal. RSA said it is also taking legal advice on whether to pursue a claim against its former auditor, Deloitte.
RSA said investigations found that the accounting irregularities were an isolated case, but the insurer is not out of the woods quite yet and signalled a new risk to its dividend from extreme weather that it said would hit 2013 results.
Chairman Martin Scicluna declined to comment on how much the dividend could drop, saying that the decision will be taken just before the company reports full-year earnings next month.
RSA said reviews of the group launched after the emergence of the problems in Ireland - by auditors PwC, KPMG and its own internal teams - had concluded that the accounting problems were restricted to Ireland.
RSA said PwC had found evidence suggesting inappropriate collaboration among a small number of senior executives.
"This evidence suggests that certain individuals acted in such a way as to intentionally circumvent parts of the existing control framework," the company said, adding that this resulted in inaccurate reporting to the group.
The company said RSA Ireland Chief Financial Officer Rory O'Connor and the unit's claims director, Peter Burke, were "dismissed for their roles in relation to large loss and claims irregularities".
None of RSA Ireland's recently departed executives could be reached for immediate comment on Thursday.
Investors appeared to accept the firm's clean bill of health and that the Irish issue was isolated rather than systemic. "It is probably reasonable to say that the issue was contained to one region," one RSA shareholder said.
Ireland's central bank, however, said it expects to continue examining issues related to RSA's operations in the country for several months, raising the prospect of further challenges for management later in the year.
The issue also raises awkward questions for former group auditor Deloitte.
"We will take appropriate external advice to see what our course of action might be," RSA finance director Richard Houghton told Reuters.
Deloitte said it was not in a position to comment because it had not seen the PwC report nor RSA's review, while a spokesman for Britain's accounting watchdog, the Financial Reporting Council, said: "There is currently no formal investigation of Deloitte or RSA."
A possible spat with Deloitte would be embarrassing for RSA Chairman and acting CEO Scicluna, who is a former partner at the auditor, though Houghton said the chairman has excluded himself from all board discussions related to Deloitte "to avoid any suggestion of conflict".
Scicluna called the Irish unit's problems "completely unacceptable" and said that RSA is tightening its controls.
He said the review, which could involve the sale of business units to raise capital, is ongoing and all options are being considered. "Nothing has been ruled in, nothing has been ruled out," he said.
Heavy share price falls after the scandal emerged prompted speculation of a bid for the entire group, though Scicluna told Reuters that RSA has not received any approaches.
The group's shares were down 3.6 percent at 1333 GMT.