Stephen Hester has sealed his first of several expected deals to sell RSA businesses, agreeing to sell its operations in the Baltics and Poland for £300 million (Dh1.85 billion) as part of his overhaul of the FTSE 100 insurer.

Just a week after completing an emergency rights issue as it tries to recover from accounting irregularities at its Irish arm, the new chief executive said the insurer would sell the assets to its rival in the region, the Polish insurer PZU. The transactions are subject to regulatory approval in several countries.

Barrie Cornes, insurance analyst at Panmure Gordon in London, said the deal had been reached at what “appears at first glance a reasonable price”.

The disposal should help the RSA chief achieve his aim of raising about the same sum as the £775 million equity raising through other measures, as he tries to soften the blow to investors of tapping them for cash.

Hester is set to undertake a cost-cutting drive and disposals of several assets as RSA focuses on “core businesses” in its main markets. More deals are expected this year.

The deal announced on Thursday excludes RSA’s business in Russia, Intouch, which some analysts expect will also be sold. The insurer is also looking at selling its brokerage business in Canada.

RSA said it would fetch about £225 million for its operations in the Baltics — three businesses that write several lines of non-life insurance including home, motor and commercial in Lithuania, Latvia and Estonia. It will receive about £75 million for the Polish business.

The operations are relatively small in the context of RSA — combined, they wrote £241 million of premiums before paying for reinsurance, of a group total of £8.7 billion, and produced pre-tax profits of £19 million — but have sizeable market shares within their respective markets.

RSA said the disposals will strengthen its tangible net assets by GBP200m and are likely to complete in the second half of this year. Senior managers are expected to keep their jobs.

In a statement, Hester — the former Royal Bank of Scotland chief drafted in earlier this year to turn around RSA — said the transaction was a “good deal for our shareholders, customers and employees”.

The disposal comes just a day after the latest in a series of senior management changes at RSA. Adrian Brown, head of RSA’s operations in the UK and western Europe, is leaving after 25 years.


— Financial Times