Zurich Insurance Group has confirmed that it is evaluating a possible offer for RSA Insurance Group.
In a stock exchange announcement earlier today (28 July), the insurer noted that there is no firm intention to make an offer, but in accordance with trading rules Zurich is required by the end of play on 25 August to make a decision either way.
RSA’s board stated that they have not held talks with or received a proposal from Zurich and therefore advised shareholders to take no action.
“RSA looks forward to updating the market on trading performance and strategic progress at the interim results announcement on 6 August 2015,” it added.
Shares in RSA rose 13.34 per cent following the news to 496.4pence, while shares in Zurich fell 1.5 per cent to 293.1p.
RSA employs about 19,000 people worldwide, including 8,000 in the UK, where last February ex-RBS boss Stephen Hester took over as chief executive.
Since then he has brought in a new management team, sold off various assets and launched a £748m rights issue. However, at RSA’s annual meeting in May more than a third of investors still failed to back the company’s remuneration report.
Zurich meanwhile, is Europe’s third-largest insurer, employing around 55,000 people worldwide, including 7,000 in the UK.
Zurich UK Life reported earlier this year a 6 per cent year-on-year increase in business operating profit to £115m at the end of 2014, with new business worth £125m, an increase of 17 per cent on 2013.
Christopher Beauchamp, market analyst at the IG Group, told FTAdviser that it looks like a marriage of two willing parties.
“Zurich’s desire to make acquisitions has been well-telegraphed, and while Hester has made it known that he would do a deal, the lacklustre performance of the shares over the past six months (the past week excepted) will have made RSA a more attractive prospect, especially since a cheaper price will help to offset any costs from ongoing restructuring/further profit warnings.”
He continued that RSA investors will be enthused by the prospect of a deal, while Zurich’s shareholders may be less so, given the need to take on the pension deficit and underperforming operations in the UK and Ireland.
“These of course could be sold off later, which will help recoup costs further down the line,” added Mr Beauchamp.
peter.walker@ft.com
