Analysts unconvinced of deal taking place, but enthused at the prospect
Equity analysts have expressed scepticism about the rumours that Aviva will bid £7bn for RSA, while acknowledging that a merger between the two UK insurance heavyweights would make sense.
Some suggest that the prospect of having RSA chief executive Andy Haste run a combined operation would be welcomed by the markets. Following the work he has done to restore RSA since joining in 2003, he is clearly in high demand. He was reportedly approached for the top job at Zurich Financial Services in 2009 and his name was recently linked to the job of chief executive of Lloyds TSB.
“He is very well respected in terms of the turnaround he has achieved at RSA and is well-regarded in the industry,” one analyst said. “Generally, everyone seems to think he is a very good manager of businesses.”
In a research note issued on Monday, Panmure Gordon analyst Barrie Cornes alluded to potential management changes should an RSA/Aviva merger ever take place. “As with previous mergers [Royal Insurance & SunAlliance], there can be issues over who might end up with the top jobs should Aviva and RSA become one company,” he wrote. “While this can sometimes be seen as an issue, on the flip side it can also resolve management succession issues."
Cornes also pointed to the £300m cost savings that RSA referred to when it made its failed £5bn bid for Aviva’s general insurance bid last year, which would still be available.
But the deal is viewed as unlikely because of the premium to RSA’s current net tangible assets that Aviva would have to pay to make the deal worthwhile for RSA shareholders.