Rsa Insurance Group Ld Share Discussion Threads

[coley15] 21/8/2015 07:23

Zurich Insurance drafts in Evercore as clock ticks on RSA bid

[loganair] 20/8/2015 18:02

Zurich/RSA merger could hit ratings: Fitch:

Zurich Insurance Company (ZIC) ratings may come under pressure if it issues debt to buy RSA, according to Fitch Ratings.

Fitch said that the issue would be any increase in debt leverage, should ZIC deploy this strategy.

In a statement, Fitch said: ”ZIC has previously said that it has about USD3bn available for M&A. This sum compares with a market valuation of RSA of around USD8bn. ZIC has also indicated that it has an appetite to issue more hybrid debt, so Fitch expects ZIC, if it proceeds, would fund the acquisition with a combination of existing resources and new debt.

”Fitch reiterates that an increase in ZIC’s Fitch-calculated financial leverage (adjusted debt-to-total capital ratio) to above 30% is the strongest trigger for a negative rating action. ZIC’s financial leverage was at 23.2% at end-2014 and the 30% level would potentially be breached if ZIC raises USD5bn or more of additional debt to help finance the acquisition.”

The Fitch statement added that a decline in ZIC’s capital strength under Fitch’s Prism factor-based capital model, which is likely if the deal goes ahead, could also lead to a downgrade.

Fitch added: ”Finally, deterioration in ZIC’s profitability following an acquisition could also lead to a downgrade, although ZIC has emphasised that any investment must yield at least a 10% return on equity.”

ZIC has until 25 August to make its mind up about buying RSA.

[loganair] 20/8/2015 11:25

Just 5 days to go until Zurich have to either put up or shut up......

[dutch123] 16/8/2015 08:29

One of the insurance veterans who created RSA Group almost 20 years ago has said that the FTSE 100 insurer has “disintegrated” and that a bid from rival Zurich would put the company “out of its misery”.

In an open letter to The Sunday Telegraph, former joint chief executive Richard Gamble said that it would be in shareholders’ and employees’ interests if RSA were to be taken over.

The letter comes just over a week before the August 25 deadline by which the Swiss group Zurich must make a firm bid for its London-listed rival or walk away.

Mr Gamble was chief executive of Royal Insurance from 1991 and led the merger with Sun Alliance in 1996, when he became joint chief executive with Sun’s Roger Taylor.

Richard GambleRichard Gamble In the letter, Mr Gamble says that the company has essentially trod water over the past two decades, with too many “fire sales” of assets and repeated rights issues.

“Whilst [chief executive] Stephen Hester has possibly tidied up the company, he has done nothing with the business to develop it further. Maybe he was simply hired to get it sold,” he questions.

“I think it is a great shame that the strategy of the directors and management over the years has been to sell off the efforts of their predecessors and in several cases not even realising full value.

“I am still a shareholder and must admit that I would welcome a bid to put me out of my agony of watching the company of which I was so proud disintegrate in the way it has over the last 17 years.”

Zurich first revealed it was considering a bid for RSA in late July, following newspaper reports it was considering a 550p-a-share approach.

Since then RSA, led by former Royal Bank of Scotland chief Mr Hester, has delivered better than expected half-year results that will have bolstered any likely defence.

Stephen Hester says he "doesn’t carry any negative emotions about RBS" Stephen Hester joined RSA in February 2014 Photo: EPA

The Sunday Telegraph reported a fortnight ago that RSA and its advisers will only be interested in a bid above 600p-a-share. Zurich’s advisers, meanwhile, have weighed up bid prices as low as 525p, and executives have said that they would rather return the cash to investors than overpay for a deal.

Shares in RSA closed at 507p on Friday night, valuing the company at £5.16bn.

In the letter, Mr Gamble emphasises that he when he took over Royal in 1991 the shares were valued at £1, and when he left it was valued at £8 – or equivalent to £40 after taking into account the share consolidation in early 2014 that followed a £748m rights issue to shore up the group’s finances.

However City sources pointed to the early teething troubles of the newly merged company, ahead of Mr Gamble’s departure in December 1997.

Reports from the time suggest Mr Gamble and Mr Taylor “squabbledR21; as joint chief executives, and the pair were replaced by American Bob Mendelsohn who came in with a plan to cut costs, increase efficiency and focus on general insurance.

Mr Mendelsohn was in the job until September 2002, when he departed ahead of a rights issue, and was replaced in 2003 by current Wonga chairman Andy Haste, who led the insurer for eight years until 2011.

An RSA spokeswoman declined to comment.

[loganair] 15/8/2015 09:12

Under 600p I would like to see RSA remain as an independent company. In my good opinion when it comes their Final Dividend will be in the region of 5p and for next year I can easily see an Interim of 4p and Final of 6p giving a total Dividend of at least 10p with the share price higher than it is today and therefore I can not see of any reason for selling out under 600p.

So just 10 more days until Zurich has to either put up or shut up.

[loganair] 15/8/2015 09:06

RSA, which has a market value of about £5.1 billion, has some very interesting assets from a Zurich perspective. It has fast-growing businesses in Latin America, a region of the world that Zurich has heavily invested in itself and wants to play a big part in. Meanwhile, RSA’s Scandinavian operations are in a highly consolidated market, which is very hard to break into organically. Europe’s fourth largest insurer by market value would generate significant cost-savings from the combined entity, while the addition of RSA’s assets would greatly reduce Zurich’s regulatory burden.

The Swiss insurance giant, whose balance sheet is about ten times bigger than RSA’s, is under increased pressure to make the acquisition after the two companies reported earnings. Zurich missed estimates as its non-life business came under pressure, while RSA’s first-half profit surged 84%, a sign CEO Stephen Hester’s turnaround plan is paying off.

After a series of profit warnings in recent years, RSA’s £259 million of operating profit was about £50 million better than expected, while Hestor said the company had reinstated its interim dividend at 3.5p and said it remained confident in meeting its medium-term performance targets. In response to questions about the possible takeover, Hestor said: “The blue-chip insurer had a bright future as an independent company and that Zurich would not be the only one interested in the business if a decision was taken to sell.”

Zurich said any RSA bid is likely to be all in cash, although it was keen to point out that it would not overpay for RSA. Analysts suggest a bidder would have to offer at least 550p per share just to be taken seriously, while there is a real chance that other insurers including Allianz, Generali and Aviva, might be mulling an offer.

Technical analysis is of limited use in this scenario, although the chart of RSA highlights the recent ascent in the share price, with support seen at 502p.

The downside risk is that Zurich walk away, although the deal makes sense on a number of levels. At the time of writing the share price is 508.5p and with a 3% stop-loss below recent support at 493.25p, a short-term trade, will offer an attractive risk /reward bias with a 7% target at 544.1p.

This report was written by Mark Allen – Head of Derivatives at SI Capital Stockbrokers.

[optomistic] 14/8/2015 13:24

SP getting a touch erratic now.

[tfergi] 14/8/2015 12:43

When in the Zurich deadline for a bid?

[loganair] 14/8/2015 11:50

The share price to me is suggesting it is either going to be a very low bid or no bid from Zurich.

Personally under 600p I would prefer RSA to go as an independent company as in a couple of years time in my good opinion will be paying 15p to 20p dividend with the share price where it currently is today.

[optomistic] 14/8/2015 10:50

Price appears to being very much controlled this morning.

[optomistic] 14/8/2015 09:07

...This is one weird takeover!!

[blueteam] 12/8/2015 11:48

Will be bought, just at what price, at this level some money to be made. Expect a big jump in share price coming days.

[optomistic] 12/8/2015 11:42

....has Hester had talks with Zurich yet?

[loganair] 12/8/2015 11:30

600p RSA might accept an offer from Zurich at this price:


City tips Zurich’s takeover bid to succeed - Analysts at Barclays fuelled speculation the board of RSA might be pressured into accepting a bid from Zurich Insurance if the price is right.

Lead number cruncher Andy Broadfield said the lack of other options for the More Than insurer means it is “one of the more value creating transactions” it could make.

The FTSE 100 group is thought to be holding out for a 600p a share from the Swiss insurance giant.

The Barclays analyst said: “We believe, in theory, a Zurich/RSA tie-up could create significant value. However, how the deal is funded and at what price are the key issues.”

The fact some of the ex-Zurich management are dotted around RSA could encourage Zurich to push through deal, Broadfield added.

[topvest] 12/8/2015 11:10

Yes, but RSA destroyed shareholder value through a 3 for 8 rights issue in 2014 at 56p and so comparing the share price with then is not on a like for like basis. I believe that this is the second time they have destroyed value, the first being in or around 2000 when they had their last rights issue. Overall, it's a pretty pedestrian business that will never amount to that much.

[topvest] 11/8/2015 19:27

A premium on the existing price. No doubt they are running various scenario's to justify a £5.75/6 bid which would be a premium on the current price and a pretty hefty premium on the undisturbed price of a few weeks back.

[dutch123] 11/8/2015 18:08

What's a premium ?

[dutch123] 11/8/2015 17:55

Zurich Insurance is making plans to cut hundreds of millions of pounds from potential takeover target RSA's annual reinsurance spending, a move which could aid Zurich to explain the reason for paying a premium for RSA.

[topvest] 11/8/2015 16:59

It would be good news for half-job Hester (i.e. RBS then RSA) if he could exit at a good price and take the top job at a bigger and better company, such as Barclays. He must be interested in taking that job and anything above £5.50 will be lapped-up at RSA as a reasonably good half-job done.

[blueteam] 11/8/2015 15:04

Deal offer is on. So the rumor has it. Price rise coming

[optomistic] 11/8/2015 08:45

Taking too long for 'the deal' to be announced!

[dutch123] 09/8/2015 08:24

When Stephen Hester left the Royal Bank of Scotland in June 2013, it was with a sense of a job half done.

After almost five years in the role, he felt hamstrung by the Chancellor, George Osborne, and somewhat frustrated at the lack of control he was able to take of the troubled business given the Treasury’s 80pc stake in it.

Shortly before he announced his surprise departure, he said, of his mission to clean up RBS: “I hate not winning, I hate it.”

Those words turned out to be more prosaic than perhaps he realised, as within days of that interview being published, Hester was out of the door.

Stephen Hester - RBS sketch: Up pops Stephen Hester like some circus messiahStephen Hester

Days later, he told this newspaper he felt “completely content” with his decision, and that he didn’t “want to punch someone in the eye.”

“I haven’t hidden from anyone that I am torn a bit at this juncture. Part of me did want to see the job fully through,” he confessed, admitting that another part of him was driven nuts from time to time by the job.

While many thought he would spend some time – if not the rest of his career – out of the limelight given he had become the very public face of an industry at its worst possible nadir, it showed the strength of the man that he reappeared at troubled RSA just over six months later.

RSA’s troubles centred on a scandal at its Irish business, and questions over whether predecessor Simon Lee had really done enough to manage the sprawling business’s capital.

Hester, freed from the shackles of Government ownership and with the FTSE 100 insurer’s investors behind him, was quick to act. He increased the capital position, through a £750m fundraising and other capital actions such as disposals, cost-cutting and ending unprofitable business lines. He also focused on four core areas – the UK & Ireland, Scandinavia, Canada and Latin America. This allowed him to exit a number of geographies, freeing up capital to be used in these core businesses.

Hester’s plan paid off. Last Thursday, he was able to deliver a strong set of numbers which showed the strength of the turnaround.

Operating profit for the six months to June rose 84pc to £259m, and pre-tax profit was up more than threefold to £288m, ahead of the £235m that analysts had been expecting.

Yes, some of this rebound was due to a lack of adverse weather which had impinged RSA in the same period a year earlier, but a fair amount was due to the measures Hester has put in place. Not that anyone with intimate knowledge of what went on at the bank blamed Hester personally for what happened at RBS – he was truly put between a rock and a hard place, or a Chancellor and a baying public, if you will – but from a reputational standpoint, Hester’s 18 months at RSA have allowed him to rehabilitate himself in the City’s eye.

A brave choice to return to the fore so quickly – he had been speaking to the insurer’s chairman Martin Scicluna about possible solutions to the Irish crisis before signing on to take the job – it could all have gone very differently.

Zurich’s appearance as a possible bidder for the London-based insurer is a flattering one, and goes to reflect the strength of the turn-around under Hester. But the Swiss insurance giant is perhaps in danger of under-estimating the fight it has on its hands.

Josef Ackermann quits Zurich Insurance over death of finance chiefZurich could snap up RSA

Suggestions in the Square Mile among certain fraternities that Hester might like to sell up and get out are, in my mind, wide of the mark. The serial chief executive is right to feel that he has done a strong job to date, but also to feel there is more that can be done.

His comments following the publication of results appeared to welcome all comers – not just Zurich – to take a look at the business, with the caveat that its recent strong performance meant it would still be attractive “ten years from now.”

RSA’s share price on Friday night closed at 506p. Zurich is, if reports are to be believed, hoping to offer a low-ball bid that starts with a 5. RSA’s board, according to a report in this newspaper a week ago, would prefer something that begins with a 6.

As the average takeover premium for FTSE 100 and 250 constituents of late has been in the region of 30pc or more, the RSA board’s believed hopes are not purely fantasy.

Hester rightly sees his core role as getting value for shareholders – and he is on the right track. RSA’s shares are 10pc higher than they were 18 months ago, and on the back of the recent results, and the round of investor meetings that follow, expect them to track higher.

Zurich has until August 25 to make an offer or walk away, and on the back of the better-than-expected results, the chances of it doing so are receding by the day.

Whether it does or it doesn’t is of little matter to the way in which Hester has handled his latest challenge. His rehabilitation, were it needed, is complete

[loganair] 08/8/2015 07:59

IC VIEW: RSA still has a long way to go on the road to recovery, and these could yet be the last set of accounts after reports that Zurich Insurance is mulling over a possible bid. Zurich has until late August to make a formal offer or walk away. Until then, RSA's steady progress makes the shares worth hanging onto. Hold.

Last IC view: Hold, 500p, 28 Jul 2015