Shares closed up 3% last night

The stock market has welcomed the appointment of Stephen Hester as group chief executive of RSA Insurance.

RSA’s share price rose 3% to close at 99p last night.

Panmure Gordon analyst Barrie Cornes said Hester’s appointment made the prospect of RSA being sold off less likely.

“He’s not joining to oversee a break-up,” he said.  

Shore Capital director Eamonn Flanagan agreed.

“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.

Flanagan said that Hester’s appointment illustrated the “underlying quality” of RSA Group.

“The strength of the Hester brand in the market may embolden the group to push for a capital raising,” he said.

Turnaround man Hester was widely respected by the City for his role in preparing RBS for privatisation – its share price dropped 7% when he left in June.

He said yesterday: “I look forward to getting started immediately and working closely with the board on the business review to ensure that we are able to deliver strength and value to all of our stakeholders and re-emerge as an attractive solidly performing group.”

RSA is due to report the conclusions of the review into how to improve its capital strength, optimise its business portfolio and deliver a sustainanable divident at its full-year results on 27 February.

It needs to raise capital to make up for the £200m reserve strengthening and claims and accounting irregularities in Ireland will wipe off its profits, with further losses predicted from extreme weather events.