More Than-owner RSA (RSA) rallies 13.3% to 496.2p as it becomes the latest insurer at the centre of takeover speculation. Swiss outfit Zurich Insurance has confirmed it is weighing up a bid for the FTSE 100 insurer, presumably to bolster the group's geographic footprint.
RBC Capital Markets says: ‘Although RSA has encountered a number of problems in its business in the last two years, the company continues to have an attractive geographic split of business.'
‘Of particular interest to bidders would be the Scandinavian business in our view. Scandinavian insurance markets have oligopolistic characteristics, with few market players and strong profitability with low levels of competitions.’
Home, motor, pet, marine and construction insurer RSA could be sold at a 29% premium to Monday’s 437.8p per share price, an analyst at Panmure Gordon speculates, valuing the deal at around £5.7 billion. Shares flagged a potential bid for RSA in a recent cover story.
There have been several deals in the sector in the past year including Canadian group Fairfax buying Brit Insurance for £1.2 billion and Aviva (AV.) paying £5.6 billion for Friends Life. Buying a rival firm has been one way insurers have been spending their surplus cash while premiums continue to fall in the current soft market.
RSA remains in turnaround mode after its Ireland-based business was at the centre of a fraud storm towards the end of 2013, forcing the parent group to inject an emergency £200 million of funding into the unit. There has also been fallout from RSA's subsequent £775 million rights issue, in March 2014.
RSA’s premium power has fallen victim to competitive pressure in the motor and home markets in recent years, but it enjoyed a good first quarter this year with net written premiums increasing 1% to £1.5 billion year-on-year. Interim results will be published on August 6.