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
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
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
"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.