RSA launches £773m rights issue

RSA has launched its planned £773m rights issue.

The size of the issue is slightly smaller than the £775m the company announced when it revealed its plans in February.  

RSA will receive net proceeds of £748m from the issue after expenses.

The insurer has issued 1.4 million new shares under the initiative, priced at 56p a share. This is a 40% discount on RSA’s closing share price of 93.4p on 24 March – the last business day before the issue was announced.

Existing shareholders have been offered three new shares for every eight they hold.

The net proceeds will be held as cash or low-risk investments to improve RSA’s capital strength and surplus over its capital requirements.

RSA chief executive Stephen Hester said: “Following a comprehensive review of the options available to RSA, the board believes that the rights issue will enable the group to restore its capital position and keep ahead of anticipated industry capital trends, and that this will allow the business to carry out its action and improvement plans without undue risk of suboptimal decisions forced by capital shortage or instability.

“We thank shareholders for their ongoing support. We remain focused on delivering the transformation programme we outlined at our preliminary results presentation in February and look forward to sharing more details on our plans in the coming months.”

The rights issue is one of several measures RSA announced with its results on 27 February to bolster its capital base.

The company is also planning to raise £300m by selling businesses.

RSA needed to raise more capital after discovering accounting and reserving problems at its Irish operation in November. The remedial action pushed RSA to a £244m pre-tax loss in 2013.