Tom Broughton, editor
The mounting speculation surrounding a takeover of RSA has probably been fuelled by the news that chief executive Andy Haste has taken his first outside directorship at ITV. But analysts point out a set of factors that may give a little more substance to the barroom chatter. RSA has been through its cost reduction process and has stood still in the soft market relative to its closest competitors, but the insurer remains strong, epitomised by it posting an operating profit of £230m last week. This result, accompanied
by it riding the wave of a number of large losses and settling a legal action from General Motors last month, begins to make it appear a safer bet for potential predators. Especially given that its gross written premiums have increased, albeit by only 1%, and underwriting profits are in line with City expectations. Then there’s the theory that RSA moved to buy up its Scandinavian minority interests last year because it is preparing for a disposal and wants to present the business as a more compact offering.
One market analyst sums the situation up neatly: “If you were targeting an insurance company, RSA would be the one to go for.” And there may be a few companies around with the spare capacity to launch a bid following the move by RBS to scrap its auction for its insurance division after the £7bn price tag was deemed too high. So the likely contenders for RBS – Zurich, Allianz and US giant Allstate – would have the appetite and capacity for such a deal. But that in no way means RSA has a similar appetite to talk back.
On Friday Insurance Australia Group reports its full-year results, a month after its announcement that it plans to dispose of its UK operation, which is dominated by Equity Group. There are a number of plays that could unfold in this situation, including a management buyout and several trade buyers looking to unravel the value from its underwriting broking businesses. But one scenario that would lead to a dramatic shift in the UK landscape would be if its Australian rival, QBE, came back in for a second attempt at securing the group. It would give it dominance down under and increased impact in the UK.
Now that Michael Hawker, the former IAG chief executive, has departed the group it may pave the way for QBE to strike again. Watch this space.