RSA

Bid speculation surrounding RSA Insurance Group (RSA) has driven the share price up around 40% to 163p (although it has since slipped back to 158p) prompting Youssef Zia of Royal Bank of Scotland to judge the stock as ‘fully valued’.

Zia downgraded RSA from ‘buy’ to ‘hold’, although he increased his price target to 164p from 166p. He notes the rally has been driven by rumours of a bid from Zurich Financial Services or QBE and casts some doubt on the prospects for a bid: ‘Given RSA’s market capitalisation this would be a sizeable acquisition for any potential buyer and it raises the question of why there wasn’t a bid in the last three years, when its share price was lower.’

Zia adds he sees valuations as more attractive in the life insurance space rather than in the non-life sector and therefore believes it is more likely consolidation will happen here.

Elsewhere, analyst Andrew Hughes, from house broker JP Morgan, was more aggressive on RSA, downgrading the stock from ‘overweight’ to ‘underweight’ and saying the expected deterioration in the UK economy would make a bid for the company less likely.

by Tom Sieber