From RBS to RSA: Hester's back

Having stepped down from RBS at the end of last year, Stephen Hester has been appointed chief executive to troubled insurer RSA.

by Emma Haslett
Last Updated: 21 Sep 2015

After six turbulent years as the chief executive of one of Britain’s baddest banks, former RBS boss Stephen Hester could be forgiven for wanting to spend the rest of his days tending the roses on his 350-acre Oxfordshire estate. Apparently, though, that’s not his style: last night, embattled insurance company RSA announced Hester’s appointment as its new chief executive.

A quick recap on RSA’s recent troubles: in December the company’s chief executive, Simon Lee, quit as it issued its third profit warning in six weeks. Basically, RSA had discovered an ‘accounting irregularity’ (MT’s favourite euphemism) which added up to £130m, almost twice the £70m it had originally thought.

To be fair to Hester, he’s already taken on one of the biggest turnaround jobs in the biz and, it’s arguable, won. But RSA is another job entirely: Hester has until the end of the month to find a way to fill a capital shortfall now thought to be as much as £500m. There’s a good chance it’ll be forced into doing a rights issue and will cut its dividend payment, which won’t exactly help its share price.

The full impact of RSA’s problems won’t be felt until it delivers its full-year results, along with the findings of a strategy review, at the end of February. Until then, though, Hester has the impact of a stormy winter to deal with - at the end of January, the Association of British Insurers estimated the cost at £426m. Just what RSA could have done without: and the weather hasn’t let up since then, so expect that to grow.

Nevertheless, RSA chairman Martin Scicluna’s relief was palpable when said he was ‘over the moon’ about Hester’s appointment.

‘He is an exceptional business leader with extensive global financial services expertise. He has an outstanding track record of transforming the performance of businesses, bringing new energy and focus and implementing a challenging agenda,’ he said.

Investors seemed to agree: in the few minutes between the announcement and the closing bell, shares rallied 2.53%. Expect that to continue today.

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