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The stock is trading at 107p following the revelation that some ‘issues’ were uncovered during a routine internal audit in the company’s Irish ‘claims and finance function’ unit. PwC has been appointed to conduct a thorough and comprehensive appraisal of the operation. A number of members of the senior management team have been suspended while the investigation is carried out, including chief executive officer (CEO) Philip Smith, chief financial officer Rory O’Connor and claims director Peter Burke.
The group CEO, Simon Lee, stated that the company’s capital position ‘remains robust’ and the firm is still committed to its ‘dividend policy, which is aligned with market expectations’. RSA added ‘all our Irish businesses continue to operate as normal and policyholders will not be impacted’.
RSA has injected additional cash into the Irish unit to ensure it is meeting the 200% solvency ratio which is set by the Irish central bank. Investors tend to fear the worst in investigations of this type, but we could see the share price bounce back if it turns out that the Dublin-based operation is not in danger of collapsing.