First half profits surge at RSA Insurance
- Credit: PA
A surge in first half profits at RSA Insurance was overshadowed today amid reports that a potential takeover offer for the UK group by Swiss-based rival Zurich will fall short of hopes.
Zurich, which also posted its half-year results today, said it saw “significant benefits” from a takeover of RSA, but added that “any capital deployment would need to meet the same hurdles that we apply to any other investment”.
The European insurance giant said last week it was considering an offer for RSA, with speculation suggesting a bid might be worth £5.6billion, or 550p a share, but reports today suggested that Zurich is putting together a bid of around 527p, worth £5.4bn.
RSA shares fell in early trading despite posting interim results showing that group operating profits rose 84% compared with last year’s first half to a better-than-expected £259million, driven by higher underwriting profits, fewer weather-related claims and stable investment income.
Shore Capital analyst Eamonn Flanagan said the release of RSA’s robust half-year results meant the “gloves have come off and the bidding process can start in earnest”.
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He said RSA had “a suberb number of assets around the globe”, adding it may also be attractive to rivals such as Allianz and Generali.
RSA, which has advised its shareholders to take no action as regards a potential bid from Zurich, is headed by chief executive Stephen Hester, the former boss at Royal Bank of Scotland, who was hired to revive the insurer’s fortunes after it was hit by a series of profit warnings more than 18 months ago.
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Since Mr Hester took over at RSA from his predecessor Simon Lee, he has sold a clutch of assets, overhauled the management and held a £775m rights issue to rebuild the group’s balance sheet.
RSA said today: “The intense pace of change over the last 18 months to make RSA better, stronger and more focused is now producing strong results.”
The insurer said its underwriting profits in the UK were at their highest since 2006 due to a more disciplined approach and hit a 10-year record at its sizeble Canadian business.
It added that over the last six months it has sold businesses in Hong Kong, Singapore, India and China. It also announced the disposal of its UK engineering inspection business, bringing its total agreed disposals to £835m over the last 18 months.
The firm said it expected the insurance market to remain competitive, with the group having to make trade-offs between sales and strong pricing.
Mr Hester added: “Our goals for 2015 as a whole and beyond are unchanged - to make further strong and sustainable progress towards an RSA that is ‘Focused, Stronger, Better’.
“We firmly intend to build a company that will thereby outperform for customers and for shareholders.”
Half-year profits from suitor Zurich showed second quarter net profit falling 1% to 840m US dollars (£538mn), impacted by losses within its general insurance division.