RSA Insurance (LON:RSA) are down 11% in early trading today after it announced that it suspended 3 directors at its Irish operations “pending the outcome of an investigation into issues in the Irish claims and finance functions which were identified during a routine internal audit”.

I presume it must be serious, with some weight of evidence behind it, to warrant the suspension.

RSA is interesting, because I used to own some shares a long time ago as a value play. I did quite well out of it, as I recall.

RSA is a very boring company, and has underperformed the Footsie over the last decade. At a price of 120p, it is on a PBV of 1.22. That’s only so-so for a valuation miser.

If you want to make a good crisis play, then it will need a PBV less than 1, I think. The mess that we’re seeing suggests that the book value will need to be revised downwards. A good entry point might be when the PBV is around 0.8, implying a price of 80p. I see that over the last decade the PBV went down to 0.55 – which would give you a price of c55p in today’s terms. It’s difficult to know in advance how low this thing will go; potentially “a lot lower”.

There’s always risk attached with this. If you buy in now, you may find the bottom a lot lower down, and made only a mediocre return. If you do wait, then there’s no guarantee that your entry point will become available.

I have no holding, but I’ll watch from the sidelines to see how things develop.

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