What a week for Royal Sun Alliance, already unpopular with investors following their decision earlier this year to cut their dividend payout. The impact of the St. Jude storm particularly on their large Danish subsidiary forced the company to release a profits warning. Worst still was their second warning four days later after revealing irregularities in the accounts of their company in Ireland. The subsequent share price collapse and downgrade by the rating agencies added to the firm’s misery.
Yet the current troubles at RSA are nothing compared to what has been going on at Bermuda based Tower Group. Its failure to file financial statements after announcing huge reserve charges and impairment to goodwill is now raising substantial doubts over whether they can continue to operate as a going concern, according to Insurance Insider. The problems at RSA and Tower are of a different magnitude relatively speaking but the root cause appears to be much the same; each seems to have experienced a breakdown in financial controls.
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