LONDON - The British insurer RSA Group said on Tuesday that it has launched a rights issue to raise 773 million pounds, or about $1.27 billion, as it looks to bolster its balance sheet following capital problems in its Irish business.
The company expects to issue 1.38 billion shares at 56 pence a share, giving shareholders the right to buy three shares for every eight they own.
The move will keep the company ahead of “anticipated industry capital trends†and allow it to carry out plans “without undue risk of suboptimal decisions forced by capital shortage or instability,†said Stephen Hester, the RSA chief executive.
The proceeds of the rights issue are expected to be held as cash or low-risk investments to improve the insurer’s capital position.
Mr. Hester, the former C.E.O. of Royal Bank of Scotland, took the top job at RSA in February. He joined R.B.S. in October 2008 after it took a government bailout and left the bank in September.
Mr. Hester replaced Simon Lee, who stepped down in December after the insurer said for the second time in just over a month that it would have to significantly increase the reserves for its Irish business and again warned that its profit would be lower. Mr. Lee was named RSA’s chief executive in August 2011 after eight years with the insurer.
In December, RSA said it would need to strengthen the reserves for its Irish operations by an additional £130 million pounds, primarily because of increased potential for bodily injury claims by customers with automobile and liability policies.
The company said in early November that it would have to add £70 million to its reserves because of irregularities uncovered in its claims and finance operations in Ireland, and that it had suspended three top executives in it Irish business in the face of an accounting investigation.
After the company said in November that its operating results would be lower than market expectations because of the accounting irregularities, Philip Smith, the chief executive of its Irish business, was suspended by the insurer and later resigned. Mr. Smith has said that he was being made a “fall guy.â€
Two other executives were dismissed in January after an internal investigation.
After a review by PricewaterhouseCoopers, the company said that the issues were isolated to its Irish business.
RSA was created in 1996 by the merger of two of the largest British insurers, Royal Insurance and Sun Alliance. Their combined history dates back more than 300 years; the Sun Insurance Office was formed in 1710 and merged with Alliance Assurance in 1959.
The company employs about 23,000 people worldwide and wrote £8.7 billion in net premiums in 2013.
Bank of America Merrill Lynch and JPMorgan Chase are serving as joint global coordinators, joint book-runners and joint underwriters on the rights issue.
