Stephen Hester: Cleaning RSA is a work in progress

The boss of RSA, Stephen Hester, has called the insurer a “complicated, noisy, work in progress”, warning the cost of turning around the group will be higher than first anticipated. 

 

Speaking as RSA announced its half-year results yesterday, Hester also said he would like to cut costs further than the £180m already promised by 2016, but was yet to reveal by how much. 

 

“We need to clean up this company and we need to save a lot of cost in order to be effective and competitive going forward,” Hester told City PM 

 

“In my experience turnarounds al­most always cost you more to comp­lete than you thought it would when you start and this is proving no exception. But we have also been able to make disposals at prices much better than we expected, so net, the company is ahead of where I thought it would be.”

 

RSA announced it was back in black yesterday, with an interim pre-tax profit of £69m for the first half of this year, compared to a £494m loss in the second half of 2013.

 

Net written premiums were down nine per cent, which the group put down to a more disciplined approach to underwriting. 

 

Analysts expressed concern about the Irish arm of RSA, which required more money to be poured into it in the first half of this year, following problems in 2013. “In the past six months we haven’t uncovered new problems in Ireland, or certainly nothing of substance, but our estimate of cost of clearing up the original problem has proven to be too optimistic,” Hester said yesterday. 

 

The insurer saw its share price tumble three per cent on the news.

 

The results show a complicated noisy work in progress, and that’s exactly what RSA is at this stage. I’m confident that we’re getting a lot done and the actions underway will produce a terrific company.

 

I will feel a lot more comfortable at the end of the year when Ken Norgrove (new RSA Ireland boss) and his team have had eight months of looking at the Irish business, that we’ve uncovered everything. I’m more comfortable now than I was six months ago, certainly.

 

I’m a peculiar person who gets a kick out of difficult business situations, so I’m enjoying it. But of course the company is in a difficult business situation which requires difficult and challenging decisions from me and all of my colleagues.

 

No. RSA has 23,000 people and RBS had 190,000. RBS had a £2 trillion balance sheet and RSA has a £12bn balance sheet. Then of course the government situation was different and the economy was collapsing around our ears and it isn’t now.