Troubled insurer RSA appoints ‘Mr Fix-it’ as new chief

After seeing his divorce paraded through the tabloids, pictures of him hunting on horseback plastered across the internet and having to confess to a committee of MPs that even his parents thought he earned too much, there is no doubt he underwent a baptism of fire.

It is universally agreed that Mr Hester, who grew up in North Yorkshire, took on the toughest job in UK financial services.

“RBS could have blown up lots of economies if we hadn’t done what we did after the crisis,” he told the audience at the Yorkshire Post Excellence in Business Awards. “There will be some people who think we didn’t do as well as they would wish and I agree, we would have liked to have done it better.”

Describing his five-year tenure at RBS, he said it was like being at “the centre of everyone’s anger and difficulty”.

There is one benefit to having undergone all that trauma – he is seen as the man who can fix anything.

Step forward RSA.

Shares in the troubled insurer rose five per cent yesterday on expectations that as its new chief executive, Mr Hester can turn the firm around as it struggles to cope with a £200m hole in its finances following an accounting scandal.

The stock has fallen 25 per cent over the past year, lagging a 20 per cent rally for the British insurance sector.

“Having someone on board of Stephen’s calibre and track record is certainly supportive,” said Marcus Rivaldi, an analyst at Morgan Stanley, who expects the stock to start outperforming its peers.

Of course, it would be ingenuous to say that Mr Hester was without fault during his time at RBS.

After all, the accusations made by Yorkshire entrepreneur Lawrence Tomlinson to the Treasury Select Committee about RBS’s “shady” behaviour happened on Mr Hester’s watch.

Mr Tomlinson said that small businesses across the country are having their lifeblood sucked out by “vampire” banking practices, accusing Royal Bank of Scotland of pushing small firms into default so it can seize control of their assets.

Mr Tomlinson claimed viable businesses were placed into the hands of the bank’s turnaround division, only to find it was in effect a debt collection unit stripping their assets.

That aside, the market reacted warmly to Mr Hester’s appointment yesterday.

Analyst Eamonn Flanagan, at Shore Capital, said: “Stephen Hester needs no introduction from us, except to highlight the superb job he did at stabilising RBS and then moving it forward in the face of considerable external and internal pressures.

“Full credit to the RSA Board, and in particular chairman Martin Scicluna who now reverts to non-exec, for the speed and decisiveness with which this appointment was made. Secondly, that a man of Hester’s quality is attracted to RSA speaks volumes, to us, of the underlying quality within the group.”

So, what is Mr Hester likely to do at RSA?

He brings a formidable track record of restructuring and transformation with a clear focus on the end strategy.

Analysts said that his initial comments about shareholder value and value for stakeholders should please both the investment and insurance communities.

“Disposals are likely, but this time with someone as formidable as Hester as vendor, we suspect that the exit valuations have increased considerably,” said Mr Flanagan. “At the same time, we do not believe Hester is seeking a short-term role, hence any ‘for sale’ sign which may have hung over the group is there no longer. In essence then, a terrific appointment but one which is unlikely to deliver a quick fix.”

Senior trader Afydd Davies, at Prime Wealth Group, said: “Whether Hester decides to break RSA up and sell off chunks of the business, or moves to weld together what is already there is not really a concern at this point. What matters most is that RSA finally has a figurehead with gravitas and in the eyes of the City a safe pair of hands to get the business back on track.”

Already speculation is rife that Mr Hester has been hired to oversee a break-up of the troubled insurance giant, following three profit warnings in six weeks last year.

It appears that Mr Hester is developing a reputation for winding down troubled businesses and emerging with a kernel that has the potential for future growth.