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RSA fields Zurich proposal

RSA has received a proposed takeover bid from Zurich Insurance
August 25, 2015

Shares in RSA Insurance (RSA) rose by more than 4 per cent to 517p after Switzerland's largest insurer, Zurich Insurance, made a last-minute cash offer worth 550p a share. Zurich had until 25 August to make a formal offer or walk away for at least six months, having announced on 28 July that it was evaluating a potential offer.

IC TIP: Hold at 517p

The RSA board has indicated that, provided satisfactory terms such as due diligence are met, it is prepared to recommend the offer to its shareholders. The two sides now have until 22 September to conclude ongoing discussions. The current share price is still some way below the indicated offer price; that's because there is no certainty that a deal will be agreed, with the risk remaining of Zurich withdrawing its offer.

RSA has almost completed its turnaround under former RBS chief executive Stephen Hester. A series of disposals and cost synergies saw pre-tax profits in the first half of this year jump from £69m to £288m, with the group returning to the dividend list with an interim payment of 3.5p per share. Under the terms of the proposal, RSA shareholders will retain the right to receive this payment. At the operating level, RSA achieved a crucial improvement in its core combined ratio of claims to income, which rose from a lossmaking 100.3 per cent to a profitmaking 96.9 per cent.