Search Icon

Hester outlines £180m in cost cuts as RSA turn-around continues

Fellow insurer Aviva sees rise in operating profits on back on strength in the UK and Europe

Stephen Hester was parachuted in to run RSA Group earlier this year following significant losses at its Irish arm and losses from severe winter storms in Europe and Canada Credit: Photo: Reuters

Stephen Hester moved to the next stage of his turnaround plan for RSA Group as he outlined plans to cut costs of £180m a year at the troubled insurer.

Mr Hester, who took the helm of the FTSE 100 constituent in early February, said he wanted to make savings over the next 3 years, with the potential to raise the target over time.

The former chief executive of the Royal Bank of Scotland admitted that the cuts will lead to redundancies, but declined to place a number of the likely job losses.

The cost-cutting phase is the third and final point of his turnaround strategy, following on from identifying non-core businesses, some of which have already been sold, and righting the balance sheet, which involves proceeds from the disposals and a £775m rights issue held in March.

He made the commitment on cost as he unveiled a return to profit in the first six months of the year, to £69m, up from a £494m loss in the six months to December, but 73pc lower than the same period a year ago.

The reduced profit was in the part the result of a further of £57m write-downs at the group’s Irish business, part of the problems which led to Mr Hester predecessor’s departure last December.

Total write-downs stood at £133m for the half year as Mr Hester continued to reorganise other businesses.

No interim dividend was declared, but the board did say that it is aiming to restart dividend payments early next year, alongside its 2014 results. Shares in RSA fell 13.4p to 430.5p.

Meanwhile, at fellow FTSE 100 insurer Aviva, chief executive Mark Wilson pointed to the fact this own strategy also appears to be working, with reduced debt and reduced costs leading to increased profits in the six months to June.

Operating profit increased to £1.052bn from £1.01bn in the same period last year, with cash remittances up 7pc at £612m.

The boost came on the back of a solid start to the year from its UK and European general insurance businesses, despite a weakness in Canada.

Aviva, whose shares closed up 12.8p at 502.5p, declared an interim dividend of 5.85p, up 4.5pc, payable on November 17.