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Categorized | Insurance

RSA shareholders raise pay concerns

Posted on December 20, 2013

Key Speakers At 2013 Insurance Summit©Bloomberg

Leading shareholders in RSA have raised fresh concerns about the executive pay practices of the FTSE 100 insurer after they endured heavy losses from a string of profit warnings.

A week after Simon Lee quit as chief executive, big investors in Britain’s largest non-life insurer by market capitalisation said worries about pay policies they raised earlier in the year had deepened since the group ran into recent difficulties.

    One top 15 investor said the board should do everything it could to try to recoup bonuses paid to Mr Lee, who stood aside last week. Another called on the group to conduct a review of how regional managers are remunerated.

    RSA handed Mr Lee a pay package of £2m for 2012. On top of a £800,000 salary, he received a £480,000 cash bonus and £470,000 of share awards.

    Despite discontent over pay that shareholders raised last year, RSA avoided a full-scale revolt.

    However, one leading investor said yesterday the board should revisit the subject given the group has since discovered accounting irregularities at its Irish business that have left it needing to raise hundreds of millions of pounds to firm its balance sheet.

    Shareholders “didn’t know the half of it” when they approved the pay plan, the investor added.

    RSA has since introduced a bonus clawback policy for 2013. However, it applies to future awards and is not retrospective.

    Mr Lee left with immediate effect last Friday following two years in the job and will receive a year’s salary of £824,000, assuming he does not take another job next year.

    Following the discovery of under-reserving in Ireland, another top 15 investor called on the company to ensure regional managers were not being encouraged to increase profits at the expense of reserving.

    “I would want to know how the individual business heads were being remunerated, not to be incentivised to seek short-term results.”

    People familiar with the matter said RSA would review criteria used to determine bonuses, but that it does so every year.

    They said investors had not raised the subject of remuneration in meetings that Martin Scicluna, executive chairman, held with them this week.

    Privately, investors said they had more immediate concerns.

    A fund manager at another top 10 investor said: “We are not thinking about [trying to] claw back Lee’s pay at this stage, but it is something that may be considered in future.”