RSA hired Stephen Hester in 2014 and doubled its value to a £7.2bn takeover

What was changed

RSA — one of Britain's oldest general insurers — came apart at the end of 2013. An accounting problem in its Irish business blew a hole in reserves, the company issued its third profit warning of the year and chief executive Simon Lee resigned. A £773m rights issue followed in April 2014, and the annual report for that year records the repair work plainly: 'We have rebuilt our tangible equity through a successfully negotiated rights issue and a series of disposals.'

Executive chairman Martin Scicluna had set two objectives for 2014: a new strategy, and a new chief executive. The second arrived in February, when Stephen Hester — fresh from engineering the post-bailout restructuring of RBS — was confirmed as RSA's Group CEO. The first was the strategy itself: 'Our first priority is to tighten the strategic focus of the group. Our geographic spread had become fragmented', Scicluna's letter begins — an underwriting-led turnaround of pruning portfolios, resetting pricing and strengthening reserves rather than chasing premium growth.

The 2018 report shows the middle of the grind: a 'mixed' year in which the group underwriting result missed target, so management exited portfolios with 'persistent underwriting challenge', most significantly streamlining the London Market business to a smaller set of core specialisms. Scicluna's letter defends the consistency: the strategy was 'the right one', balanced across geographies, lines and channels, judged on customer service, underwriting and cost.

The 2020 chairman's letter closes the loop: record Group underwriting profit of £550m on a 91.1% combined ratio (excluding UK&I exit portfolios), underlying EPS of 51.2p and a return on tangible equity of 18.2%, with tangible equity rebuilt to £3.3bn. In the final quarter a recommended cash offer from Intact and Tryg at 685p a share — roughly a 50% premium — valued RSA at £7.2bn. The bid, Scicluna writes, 'underlined the success of our efforts': market capitalisation had doubled from £3.6bn, and underwriting had gone from 2013 losses to records in four of five years.

Why it worked

The 2013 hole was an underwriting and reserves problem, so Hester's turnaround ran through underwriting discipline rather than financial engineering — the disposals funded the fix, not the reverse.

The £773m rights issue was taken early and in one stroke, letting management rebuild reserves and credibility in a single year instead of rationing capital for several.

Exiting subscale geographies and London Market lines concentrated capital where RSA had pricing power: personal lines and the Scandinavian and Canadian franchises.

Consistency compounded: five years of the same strategy produced four record results, and it was that record — not the crisis — that framed the 2020 takeover.

What can be applied

A turnaround in insurance is priced in the combined ratio: fix underwriting first, fund the balance sheet once, and sell assets without abandoning core markets.

Aftermath

RSA's board recommended the Intact–Tryg offer, with the activist shareholder Cevian giving an irrevocable undertaking to vote for it. The deal, structured as a break-up valued at about £7.2bn ($9.4bn), completed in 2021 and ended RSA's run as an independent listed insurer — the endpoint of a turnaround whose value was realised in a takeover premium rather than a separately listed future.