By Chris Vellacott
LONDON Dec 16 Troubled insurer RSA may
have to sell its best assets, leaving it concentrated in
slow-growing markets such as its British home patch, to raise up
to 1 billion pounds ($1.6 billion) and safeguard its credit
RSA said on Friday it needed to boost capital and may have
to cut its dividend following three profit warnings and a move
to strengthen reserves at its Irish business, where it suspects
Some analysts estimate Britain's biggest non-life insurer,
which owns the More Than brand, may need to raise as much as 1
RSA Chairman Martin Scicluna is under pressure to outline a
recovery plan to avoid downgrades to the company's credit
ratings, a move that could deter insurance brokers from
recommending its products such as car and home insurance.
Ratings agency Fitch put RSA's Insurer Financial Strength
(IFS) rating of 'A' on Rating Watch Negative on Monday,
indicating it is considering a downgrade.
Standard & Poor's lowered its credit ratings on the insurer
and its core businesses to 'A-' from 'A' and revised its ratings
to Credit Watch Developing from Negative.
RSA's Chief Financial Officer Richard Houghton said S&P's
decision would have no material impact on the insurer's
operations, its customers or its ability to trade.
Selling trophy assets in overseas markets, where RSA makes
two thirds of its revenue, could be its least worst option.
Investors who have seen their shares fall 28 percent since
the start of this year look unlikely to back a rights issue and
analysts say the company is worth less than the sum of its
constituent businesses, making the prospect of a full takeover
"The key thing is that if there is a capital shortfall,
shareholders will be unwilling to plug it with a rights issue,"
said one institutional RSA shareholder on Monday.
RSA shares have fallen by close to 12 percent since
Thursday, the day before its latest profit warning.
Scicluna, who has been running the insurer since chief
executive Simon Lee quit on Friday, told Reuters any part of the
business could be sold, but declined to say which were the most
If RSA were forced to divest trophy assets such as
businesses in Scandinavia, Canada or emerging markets in Asia or
Latin America, this would amount to 'selling the family silver,"
according to Shore Capital Stockbrokers.
RSA would be left with a rump of slow-growth western
European assets such as its Irish business, where consultant PwC
is due to report on suspected accounting problems in
January, and Britain, where market conditions for insurance are
Broker Canaccord Genuity estimated RSA would have an equity
value on disposal of up to 130 pence per share, assuming the
individual businesses are valued at between eight times forward
earnings for the British arm, and 15 times for the Canadian
That compares with Canaccord's target price for the whole
group of 85 pence, implying it is worth more broken up than as a
whole. RSA shares were trading at around 90 pence on Monday.
No bidder has yet come forward, an RSA source said on
Monday. The source said the firm is being advised by its
corporate brokers JP Morgan and Bank of America Merrill Lynch.
Scicluna and his team are scheduled for a routine meeting
this week with ratings agency analysts, the source said.
RSA has an implied rating of 'BBB', according to Thomson
Reuters data, compared with an average of 'BB+' for its peer
group of UK insurers that includes 'A' rated Aviva.