(Updates with closing share price in final paragraph.)
Jan. 9 (Bloomberg) -- RSA Insurance Group Plc is reviewing its business targets that help determine pay and bonuses after the British insurer found that those at its Irish division may have been “too aggressive.”
The insurer fired RSA Ireland Chief Financial Officer Rory O’Connor and Claims Director Peter Burke yesterday after a PricewaterhouseCoopers LLP probe found that “inappropriate collaboration” by executives led to inaccurate financial records, it said in a statement today. RSA opened an investigation into the timing of reserve provisions for insurance claims in 2013.
“We set targets for them which were thought were challenging but achievable,” said RSA CFO Richard Houghton in a telephone interview today. “We actually from the center reduced those targets because we thought that they might have been a little too aggressive.”
RSA said Adrian Brown, head of U.K. and western Europe and acting chief in Ireland, cut some of the targets when he took over in November and conducts quarterly reviews to make sure they are in line with the London-based company’s performance.
Houghton said that RSA’s targets are based on performance measures including underwriting profit and combined operating ratio. The insurer also set personal objectives for individuals on how they run the business, he said.
“When something like this happens, you think hard again about how we should adjust” the targets, “and we are in the process of evaluating that right now,” the CFO said.
RSA Chief Executive Officer Simon Lee quit last month and the insurer said it now expects a “mid-single digit” return on equity for 2013. RSA Ireland CEO Philip Smith resigned in November, saying he was made a “fall guy.”
“Our investigations have confirmed that the claims irregularities in Ireland were, in large part, the result of deliberate collaboration,” RSA Executive Chairman Martin Scicluna said in the statement today. “We acknowledge that there are lessons to be learnt and we are tightening elements of our control and financial framework in response.”
PwC found evidence suggesting individuals intentionally circumvented parts of RSA’s controls. As a result, RSA said the financial records didn’t fully reflect the position of the business, with reports made to more senior management “inaccurate and potentially misleading.’
About 1.3 billion pounds ($2.1 billion) were wiped off RSA’s market value in 2013 after the insurer issued three profit warnings in the fourth quarter and injected 200 million pounds into the Irish unit to top up reserves.
O’Connor and Burke didn’t respond to e-mails sent through their LinkedIn pages. A spokesman for Smith declined to comment when contacted by Bloomberg News.
The stock slipped 2.7 percent to 97.95 pence at the close in London. The shares rallied to a one-month high yesterday after declining 27 percent in 2013.
--With assistance from Joe Brennan and Donal Griffin in Dublin. Editors: Simone Meier, Keith Campbell