Rsa Insurance Group Ld Share Discussion Threads

[loganair] 08/8/2015 07:53

By Alessandro Pasetti - RSA in back on the right track after a few difficult years, but it remains a turnaround story its unaffected share price before Zurich-related takeover talk was 437p. Most analysts I talked to say that this is a done deal, and one that will be struck between 550p and 600p a share. But the Swiss insurer’s results missed expectations this week, and surely Zurich will not want to pay over the odds to secure a target that is still in the midst of a comprehensive restructuring.

There’s potential in RSA but there’s risk, too — and inherent operating risk is not reflected in its current valuation at a time when it’s uncertain how new regulations will impact capital requirements in the sector.

Furthermore, time is also needed to execute additional divestments of non-core assets, which could be around the corner and could help RSA release value ahead of a change of ownership.

[chancer] 07/8/2015 11:07

When Hester announced to RSA employees of the rumours surrounding Zurich takeover and stating they had not entered into any dialogue, I wonder how many people then went onto the intranet benefits package to see what they would get if they took voluntary redundancy, got made redundant or simply want to take early retirement ?

My break even point after recent dilution of shares = £5:70 (£1:14)

I think I will take my losses now.

[dutch123] 07/8/2015 08:10

Zurich Insurance Group can justify going the extra mile if it really wants RSA. Disappointing results from the Swiss insurer on Aug. 6 – and expectation-beating ones from the UK-based rival it says it might bid for – make it harder for Zurich to offer less than the 515 pence at which RSA has been trading since a deal was first mooted. Fortunately, it could offer up to 600 pence without destroying value.

RSA

Zurich boss Martin Senn reiterated on Thursday his reluctance to make a formal approach unless an RSA deal could hit his return requirements of around 10 percent. If he offered 600 pence a share – a 36 percent premium to RSA’s undisturbed share price on July 27 – Zurich’s return would just sneak over that level.

The maths works thus. At 600p, RSA’s market capitalisation plus borrowings amounts to 7.4 billion pounds. Suppose RSA can increase the 483 million pounds in operating profit it made in the second half of last year and the first half of 2015 by 15 percent annually. Then assume 200 million pounds of pre-tax cost synergies, pushing operating profit in three years to 748 million pounds. Zurich’s return that year would be 10.2 percent.

Those assumptions don’t look too taxing. Consensus operating profit figures from 11 analysts on RSA’s own website imply 16 percent growth this year. And 200 million pounds of synergies implies 15 percent of operational cost savings in RSA’s main markets like the UK and Canada, according to Deutsche Bank analysis.

That doesn’t mean Zurich will come charging in at 600p. RSA’s pension deficit of at least 600 million pounds could reduce the headroom. And RSA Chief Executive Stephen Hester is already hacking back group costs unaided. Any cross-border deal will have execution risks.

Still, Zurich’s all-important combined ratio – the extent to which premiums covered claims – slipped back in the first half to 98 percent, while RSA’s improved to 97 percent. With RSA seemingly heading in the right direction, Senn may have to offer more. The good thing for Zurich shareholders is that it looks like he can.

[loganair] 07/8/2015 07:22

Hester said that he wants a quick decision. “Hopefully the talks will be over quickly enough that it won’t have an impact, because it’s unsettling for our staff,” he said, adding that he is not inclined towards a deal.

“The plan for this company is to make it successful on its own.”

Speaking after publication of the British insurance firm’s half year results, which came in ahead of market expectations, Hester said he had “no idea” whether Zurich would make an offer. “We didn’t know they were talking about a bid,” he said. “We are not in the business of drumming up interest in buying the company.”

[loganair] 07/8/2015 07:20

Martin Senn, Zurich Insurance Group AG’s chief executive officer, is considering a bid for RSA Insurance Group Plc, one of the U.K.’s biggest insurers, after a cost-cutting program failed to revive returns for shareholders.

Investors including GAM Holding AG are cautious about the possible deal but are growing frustrated with Senn’s strategy even after he awarded them record annual dividends of 17 Swiss francs ($17.30) a share since becoming CEO in 2010. While the payout, yielding 5.7 percent this year, is the highest in the Swiss Market Index, gains for the shares have lagged behind rivals as the former Credit Suisse banker has been unable to bring profit back to pre-financial crisis levels.

“Dividend stories have a danger to be rather boring, profit doesn’t grow much, they don’t have much new to say,” said Daniel Hauselmann, who helps manage 123.3 billion Swiss francs at GAM Holding, including Zurich shares. “That creates a certain pressure. Just paying a high dividend is not ambitious enough for me, but the past has shown in the insurance sector that not all mergers deliver much value either.”

Financial results published Thursday have upped the pressure on Senn to revive earnings, as second-quarter profit unexpectedly dropped to $840 million.

“These results don’t position Zurich well for its potential bid,” Societe Generale analysts led by Nick Holmes said. “Zurich may be best advised to show it can get its own house in better order before it tries to sort out its neighbors.”

The shares have trailed those of rivals since Senn became CEO. They’ve increased 26 percent since 2010, less than half the 74 percent return for its main competitor, Swiss Life Holding AG, and an 86 percent gain for the 35-member Bloomberg Europe 500 Insurance Index. Profit fell to 3.9 billion francs in 2014, barely above the yearly average of 3.81 billion francs in the preceding five years.

Senn's biggest acquisition as CEO so far was the 51 percent stake he bought in Banco Santander SA’s insurance division in 2011 for $1.67 billion.

“Zurich fulfills the function of a rather defensive insurance stock,” said Simon Wyss, who helps manage about 260 million francs in Swiss shares, including Zurich stocks, at Privatbank von Graffenried AG in Bern, Switzerland. “And with this takeover that won’t be the case anymore. It’ll definitely be a challenge for Senn.”

Zurich would be purchasing a company coming out of one of its most tumultuous periods since the merger that created it in 1996. Three profit warnings and an accounting scandal cost former CEO Simon Lee his job in 2013 and his replacement, Stephen Hester, the former CEO of Royal Bank of Scotland Group Plc, is cutting costs and disposing of assets to shore up the balance sheet. The company returned to profit last year and it said on Thursday profit climbed 84 percent in the first half.

A takeover of RSA, which sells coverage including home and car insurance, would be the biggest acquisition of a U.K. insurer since Aviva Plc completed its 5.4 billion-pound purchase of Friends Life Group Ltd. in April.

Purchasing the company would be “a turnaround or even restructuring story,” said Wyss.

“It all depends on how well management can convince investors,” he said. “Management will have to make their own calculations and will have to explain those to shareholders. That’s when we’ll be able to judge if this makes sense or not.”

[cc2014] 06/8/2015 22:52

OK - I assume the share price was being talked down today so those in the know could pick up some more shares.

I get the feeling 525p isn't going be enough. I'm not even sure 550p will be enough.

[loganair] 06/8/2015 20:37

top - I started investing in RSA when it dropped 50% to £3.09 in old money which is £15.45 in new money. All my other buys have been below 500p (100p in old money.) Sadly it still leaves me a break even around 700p.

In the next two to three years in my good opinion RSA will be paying a dividend of around 15p to 20p per year with the share price of where it is today or maybe even a little higher and therefore I am not infavour of any bid under 600p.

[topvest] 06/8/2015 20:15

For what it's worth, my view is that £5.50 is the minimum that is likely to be accepted. Lets not get greedy; it's on my SELL list but anyway, but I will hang on to see if an offer gets accepted.

RSA has been a poor investment for pretty much everyone who has held for a while over the years.

I invested in 2009 and 2011 and then again in the rights issue (which was the second very dilutive fundraising in 10/15 years I believe). I'm break-even at today's share price and will make a reasonable profit at anything above £5.50. That's not bad for a dog investment which is what RSA has been! Obviously closer to £6 would be very good if a bidding war starts-up.

The £5.25 comments by Zurich are posturing in my view and they are just trying to make sure a £5.50 offer is a reasonable start-point ahead of getting a recommendation from the Board at something a little better.

[gutterhead] 06/8/2015 16:14

Before the string of bad news started two years ago, the shares were briefly 6-50, with the pension deficit and with results/performance lesser than those announced today. £5.50 would be a poor figure for the shareholders imo

[blueteam] 06/8/2015 14:35

the bid will be accepted and will be 5.50, they may try 5.25 but everyone know it will be 5.50 in the end and cash offer.

[davdreamer] 06/8/2015 14:15

I am happy to hold RSA shares and not accept the offer. A bit of patience will enable S Hestor to generate a recovery in the share price far greater than the miserly 550 share price that is being talked about .

[loganair] 06/8/2015 12:47

RSA chief Hester tells suitor Zurich: Put up or shut up on your £5.5 billion takeover bid:


RSA Insurance boss Stephen Hester has challenged the company’s Swiss suitor Zurich to make a bid for the troubled FTSE 100 giant.

Zurich has admitted it is interested in buying RSA but there have been no formal talks between the two parties ahead of a possible £5.5 billion deal.

Under UK takeover rules, Zurich has until August 25 to make an offer and Hester told the Standard: “They have put themselves in a put-up-or-shut-up situation… the ball is now in their court.”

Once a stock-market darling, RSA’s reputation has been hit since the discovery of a £200 million black hole in its Irish business in late 2013.

Hester joined the company last year following a five-year stint as the chief executive of state-owned Royal Bank of Scotland.

He said the value of RSA staying as a standalone business remained “strong” as its pre-tax profits recovered from £69 million last year to £288 million in the six months ending June 30.

“From being the poor performer in the class, we’re now sitting somewhere in the middle,” he added.

“Our challenge is to get to the top of the class, although it’s fair to say that we’re no longer wearing the dunce’s hat.”

In Switzerland, Zurich’s chief executive Martin Senn said a tie-up with RSA could bring “significant benefits” to its own investors.

However, he warned it would not overpay as its half-year operating profits dropped by 15% to $2.2 billion (£1.4 billion).

According to reports, Zurich’s advisors, including Morgan Stanley, are believed to be weighing up a 525p-a-share cash offer, lower than the 600p mooted by some analysts but above RSA’s current share price, which fell 8p to 516p.

“Our shareholders have had a tough time and we’re determined to make that happier,” said Hester, who declined to comment on separate reports that the company is planning to offload its £500 million Latin American business.

One company that will not be joining any bidding war is Aviva, which today impressed the City with a 9% rise in operating profits to £1.1 billion, following its £5.6 billion tie-up with Friends Life in April.

“We have a very full agenda and a lot to do with the integration of Friends Life,” said boss Mark Wilson. “Our focus is on that full agenda.”

[loganair] 06/8/2015 12:44

RSA's strong results could blow Zurich deal off course:

RSA says better weather helped cut payouts and boost results, potentially forcing Zurich to offer more to buy the insurer.


Fair weather and fewer disasters could put a dampener on Zurich’s attempt to buy RSA, after insurer posted stronger than expected interim results, thanks to fewer claims related to storms and major incidents.

The strong performance could upset a potential bid for the British company by the Swiss firm Zurich, which is understood to be considering an offer valuing RSA at £5.4bn – lower than £6.2bn some in the RSA camp had been calling for.

Stephen Hester, chief executive, said the ball was in Zurich's court, ahead of the Swiss firm's deadline on August 25 to make a formal offer or walk away for at least six months under UK takeover rules.

"Our very, very strong focus is making sure that RSA is on the path to becoming the most valuable company we can make it," he said, adding that he would consider any offer for the company that delivered shareholder value, leaving the door ajar for rival bidders.

"We have an attractive business this year and next year and will be attractive in ten years from now," he told the Telegraph. "I see no magic in this year [for consolidation] and I see no magic in Zurich vis a vis anyone else."

RSA expects to have a clearer picture of further disposals by the time of its full-year results. The firm was thought to be considering a sale of its Latin American business, but did not comment on the process alongside its results.

RSA said that as well as the plan put in place by chief executive Stephen Hester to turn around the business, which has cut expenses by 10pc.

Shore Capital analyst Eamonn Flanagan said the surprisingly good results have "thrown down the gauntlet to all comers" who might make a takeover bid.

[loganair] 06/8/2015 10:44

Every where in the press I keep hearing about RSA's massive pension deficit.

"UK pension schemes at 30 June 2015 showed a GBP106m IAS19 surplus."

Am I reading something wrong as RSA half year report says there is a pension surplus......

[chancer] 06/8/2015 10:29

I think we have hit the peak.

Hester now saying the ball is in Zurich's court.

[dutch123] 06/8/2015 09:59

(ShareCast News) - First half profits rocketed and the dividend was reinstated at RSA Insurance Group, with most key measures of performance surging, which may force giant suitor Zurich to make an improved takeover offer.
Operating profit rose 84% to £259m and pre-tax profit more than fourfold to £288m as the insurer core premiums, excluding reinsurance, widened 2% while overall net written premiums shrank 3% to £3.4bn due to disposals.

Shareholders in RSA, which saw the stock lifted last month when Zurich said it was considering a bid, were further sweetened as the interim dividend payment was reinstated with a declaration of 3.5p per share.

Chief executive Stephen Hester, who has denied any talks have taken place with Zurich, said the interim results showed the excellent progress of his "Action Plan", with the insurer's loss ratio, costs, combined ratio and capital all improved.

"The foundations are being laid to improve still further," he said. "Profits are up strongly on both a headline and underlying basis. Premium income has been stabilised, underwriting and cost levers are responding positively. The interim dividend is restored and progress continues on strategic reshaping and capital strength."

Meanwhile, in Switzerland, as Zurich reported a 1% decline in net profits for quarter to June, chief executive Martin Senn said he saw "significant benefits" in buying it UK rival.

He said management would be "disciplined with regards to targets and the hurdles attached to it" and that the "guiding principle" in any acquisition is a return of 10%.

Reports in The Telegraph on Thursday morning had suggested Zurich was considering making a lower bid for RSA at around 525p, but this may prove wishful thinking on the Swiss company's part.



The "gloves come off and the bidding process can start in earnest" said analyst Eamonn Flanagan at Shore Capital.

"In the one corner stands RSA which published much better interim results than both we and the market had expected and has thus thrown down the gauntlet to all comers. In the other corner stands Zurich which can work on updated figures to firstly ascertain how well the turnaround story is progressing and secondly how big an issue the pension scheme should be in its considerations."

He said other suspected bidders may include the likes of Allianz and Generali, depending on the nature of any firm bid that may materialise in due course from Zurich.

Panmure Gordon's Barrie Cornes said: "Whilst we think that an offer by Zurich is likely, given comments by Zurich today that any offer would have to meet its investment hurdle rates, we believe that it would be prudent to tactically 'take some money off the table' in case a deal is not agreed."

Analysts at RBC Capital Markets said that looking at the results in isolation today, there were "many signs of encouragement" and the single negative surprise in the statement was the deterioration of reserves in the Scandinavian business. Analysts did note that the media reports of a lower than expected potential bid from Zurich might weigh on the shares though.

Shares in RSA opened lower and by 09:15 BST were down 1.5% to 516.32p.

[dutch123] 06/8/2015 08:14

Good half year results.....British insurer RSA (RSA.L), subject of a potential takeover bid by Swiss rival Zurich Insurance (ZURN.VX), on Thursday posted forecast beating pretax profit of 288 million pounds ($450 million), helped by benign weather conditions.

Zurich has said it is weighing a potential cash bid for RSA, expected to top $8 billion, but earlier on Thursday said it did not want to overpay.

RSA's pretax profit for the six months to June 30 beat a company supplied consensus forecast for 235 million pounds, and compares with 69 million pounds in the first half of 2014 and 275 million pounds for the whole of 2014.

RSA said in a trading statement that large losses from volatile weather conditions were "slightly better than planned levels overall".

It said cost reductions were ahead of plans. It added losses were coming down in its Irish unit, which suffered in 2013 from an accounting scandal, but said that some uncertainty remained.

RSA reinstated its interim dividend at 3.5 pence a share, against a forecast 3.4 pence.

It said it remained confident in meeting its medium-term performance targets, including underlying return on tangible equity of 12-15 percent by 2017, adding that it "will strive to do better still".

RSA, which is undergoing a turnaround under ex-RBS boss Stephen Hester, said it hoped by year-end to have "substantially completed" its restructuring and disposals.

[loganair] 06/8/2015 07:59

City analysts will be wondering whether today's results will be enough to convince potential bidder Zurich to bump up its offer for its rival.

City analysts expect Zurich to make an offer of around 550p per share. That price would provide investors with a premium of roughly 20 per cent to the price of 440p.

However a source close to the deal previously said that the board could be targeting a 40-50 per cent premium on recent share prices. This would mean an offer of over 650p.

At the same time, several other companies believed to be interested in entering the race for the troubled British firm.

But the developments mean chief exec Stephen Hester could be set to leave before finishing what he has started. Hester was brought on to the board at RSA at the beginning of 2014, having turned round RBS.

RSA uncovered an accounting scandal in Ireland in 2013, resulting in several senior members of staff leaving the company, and also suffered a series of profit warnings.

Hester's turnaround plan is certainty taking shape, but with bidders circling, time will tell if he's able to hold onto the top spot.

[loganair] 06/8/2015 07:58

RSA H1 pretax profit beats forecast as Zurich circles:


British insurer RSA, subject of a potential takeover bid by Swiss rival Zurich Insurance, on Thursday posted forecast beating pretax profits of 288 million pounds ($449.83 million).

Zurich has said it is weighing a potential cash bid for RSA, exected to top $8 billion, but earlier on Thursday said it did not want to overpay.

RSA's pretax profit for the six months to June 30 beat a company supplied consensus forecast for 235 million pounds, and compares with 69 million pounds in the first half of 2014 and 275 million pounds for the whole of 2014.

RSA said it reinstated its interim dividend at 3.5 pence a share, against a forecast 3.4 pence.

It said in a trading statement it remained confident in meeting its medium-term performance targets.

[loganair] 06/8/2015 07:55

Interesting Zurich's results also out to day:

Zurich Insurance Group AG, the Swiss firm considering a bid for the U.K.’s RSA Insurance Group Plc, reported profit that missed analysts estimates as earnings dropped 43 percent at the general insurance unit and it made a loss on unit-linked investments.

As to what Zurich's CEO says about RSA - “We believe that a transaction could bring significant benefits to us and to our investors,” Senn said. “In terms of the complementary fit of RSA’s business with our own operations, and in terms of financial benefits from, for example, expense and other synergies,” he said.

[cc2014] 06/8/2015 07:55

How do u go short at 7:10 in the morning?

[loganair] 06/8/2015 07:50

Looking at the results am I reading something wrong as they say RSA have a pension surplus of £106mln instead of a huge deficient as being reported in the press.

Pre tax profit around 15% than expect.

3.5p Interim Dividend, pay out ratio of 40% to 50% with additional pay outs where justified.

[temmujin] 06/8/2015 07:10

gone short on this..terrible results

[skinny] 06/8/2015 07:04

Trading results

Core Group premiums up 2%1 ex Group reinsurance programme. Overall Group net written premiums of £3.4bn down 3%1 year-on-year post disposals.

Group operating profit £259m (H1 2014: £141m): UK £144m; Canada £92m; Scandinavia £55m.

Group underwriting profit of £101m (H1 2014: £23m loss). Core Group combined ratio of 96.9% (H1 2014: 100.3%). Record underwriting profits in the UK and Canada (Combined ratios of 94.4% and 92.3% respectively). Underlying results in
Scandinavia strong.

Current year underwriting profit of £73m (H1 2014: £27m); current year attritional loss ratio of 57.1%, 1.2pts better than prior year (H1 2014: 58.3%). Weather and large losses £7m better than planned and £36m2 better than H1 2014.

Prior year underwriting profit of £28m, within our expected range of 0-1% of net earned premiums. Positive development in Canada and the UK; net strengthening in Scandinavia.

Ireland underwriting loss of £16m, much reduced from H1 2014 (£65m loss) - remediation continues. Improved underwriting result in Latin America despite impact of first quarter Chile floods.

Investment income of £206m; full year outlook improved to c.£390m. Increasing bond yields during H1 are a positive for future earnings and economic capital ratios.
Net gains of £169m include £140m from disposals completed in the first half.

Reorganisation costs were £55m. No further ‘clean up’ charges in the period.
Pre-tax profit was £288m (H1 2014: £69m). Post tax profit of £215m (H1 2014: £6m).