British insurer RSA Insurance Group made an official statement today, announcing that it is planning to raise about 773 million pounds (1.28 billion dollars) in a rights offering. The company is said to be focused on increasing its capital cushion after an accounting scandal at its Irish division.
This step of the company is considered to have been provoked by three profit warnings during the last years fourth quarter as well as by a 200-million-pound capital injection that was invested into the Irish division of RSA Insurance Group Plc. These events also accelerated the departure of former Chief Executive Officer Mr. Simon Lee earlier in 2014 and the naming of Mr. Stephen Hester, who was the previous CEO of Royal Bank of Scotland Plc, as his successor.
RSA Insurance Group Plc revealed that 1.38 billion shares are planned to be issued at 56 pence a share, which is about 40% less than the closing price yesterday and also about 33% less than the theoretical ex-rights price. The company is to provide its shareholders with the opportunity to purchase three shares for every eight they already possess.
Mr. Stephen Hester, who is the Chief Executive Officer of RSA Insurance Group Plc said in the companys statement, which was cited by the Wall Street Journal: “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.”
RSA Insurance Group Plc rose by 1.04% in London by 10:14 GMT to 94.32 pence, marking a one-year change of -19.18%. The company is valued at 3.44 billion pounds. According to the Financial Times, the 21 analysts offering 12-month price targets for RSA Insurance Group Plc have a median target of 95.00 pence, with a high estimate of 115.00 pence and a low estimate of 85.00 pence. The median estimate represents a 1.77% increase from the last price of 93.35p.
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