Insurer is in a good position, say analysts

Royal Sun Alliance (RSA) is in a good position to acquire more businesses abroad, say analysts. But while industry commentators are certain the company will seek deals outside the UK, they are divided on where it will head, writes Angelique Ruzicka.

“It is looking for ways to grow, it’s got reasonably well-rated paper and it will take heart from the ease Zurich had buying AIG’s auto business [see story opposite],” said Ben Cohen, an analyst at Collins Stewart.

“There are stand-out opportunities in Canada, where there are medium-sized companies that can be put together. And some have been publicly talked about being for sale, such as Aviva’s Canadian business.”

RSA could also acquire firms in Scandinavia, he said, but he was not clear what it could do in the UK.

Another analyst, who would not be named, said RSA was likely to stick to chief executive Andy Haste’s strategy of pursuing opportunities in emerging markets. “It made an acquisition in Poland about 18 months ago and my understanding is that it is continuing to look in those markets.”

He pointed out that RSA already had a strong Canadian business, so was more likely to turn to opportunities in eastern Europe and emerging areas in the Middle East, such as Turkey.

Analysts were also divided over the size of business.

“To date it has bought only small companies and if it were to do that again it would be in the form of cash. However, if it found something attractive that made sense it would consider raising more equity,” said Cohen.

However, another analyst felt the current economic environment would dissuade RSA from taking on too much risk. “It is the one insurer that has a strong balance sheet and is in good financial health. [An acquisition] is more likely to be small, adding to what it’s got. Why take on significant amounts of debt in the current environment?”

RSA refused to comment.