Zurich’s £5.6bn RSA takeover scuppered by losses

Zurich’s £5.6bn RSA takeover scuppered by losses

Zurich Insurance Group’s anticipated £5.6bn takeover of RSA Insurance Group has fallen through as a result of recent deterioration in the trading performance of Zurich’s general insurance business.

A stock exchange statement this morning (21 September) revealed expectation of weaker than expected profitability in the general insurance division during the first half of 2015, which it set to continue in the third quarter.

Zurich estimates aggregate losses of approximately $275m (£176m) related to the series of explosions at a container storage station in the Port of Tianjin in China last month.

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The nature of many of the losses and the extended remediation period to complete repairs means that uncertainty as to the final cost remains, with a further update due to be provided in the group’s third quarter results, which are due to be released on 5 November.

“Given the deterioration in profitability in certain parts of the general insurance business, and following his appointment as general insurance chief executive, Kristof Terryn is conducting an in-depth review of the business,” read the statement.

It is currently expected that the general insurance business will report an operating loss of around $200m (£128m) for the third quarter.

Therefore, discussions with RSA have been terminated, with the group’s focus now on taking the necessary actions to deliver on the required performance of the general insurance business.

A statement from RSA confirmed that the due diligence findings were in line with Zurich’s expectations and, while the process had not been finally concluded, they had not found anything that would have prevented them from proceeding with the transaction on the terms previously announced.

RSA’s shares had risen as much as 13 per cent on the back of the unsolicited takeover talks, initiated at the end of July.

By 25 August, Zurich had tabled a £5.6bn indicative offer for the rival - which proposed paying 550 pence a share in cash - with the UK Takeover Panel agreeing an extension to formulate the possible deal.