RSA Insurance's multibillion-pound pensions liabilities are putting the insurer off a break-up as it could be forced to hand over a large share of sale proceeds to staff retirement schemes, its chief executive Stephen Hester has said.

The former Royal Bank of Scotland chief, hired a year ago to lead a turnround, told analysts and investors last week that pension trustees may demand "many hundreds of millions of pounds", and possibly billions, were RSA to sell off big chunks of its operations.

Mr Hester said: “It’s an amount that we think disfigures the full break-up strategy.”

Pensions experts and analysts said the scale of the liabilities would also discourage buyers from making a takeover bid for the insurer, which is trying to recover from profit warnings and whose results last week disappointed investors.

RSA, whose staff retirement schemes have 46,200 UK members, is one of the few FTSE 100 companies whose pension liabilities are greater than its market capitalisation. By the end of last year they had reached £7.6 billion, 75 per cent more than its equity market value of £4.36 billion.

Mr Hester’s comments about the liabilities at a City presentation last week shed further light on why he has avoided selling chunky assets, such as its Scandinavia division, to bolster the insurer’s balance sheet.

– (Copyright The Financial Times Limited 2015)