Rsa Insurance Group Ld Share Discussion Threads

[loganair] 20/6/2018 09:33

Allianz’ CEO Seeks Big M&A – But He Doesn’t Want to Pay for It by Chris Hughes:


The CEO of Europe’s biggest insurer is up for a big deal. He just doesn’t want Allianz SE to pay for it. Oliver Baete is going to find it hard to have his cake and eat it.

Three years into the job, and things are going well for him: Allianz reckons it has surplus capital and the shares have outperformed their peers despite a recent wobble. But Europe’s insurance market is only growing slowly, and the group is keen to boost its general insurance business, which is less capital intensive than life and savings. A deal would put some of Allianz’s surplus cash to work, generate savings and re-shape the group.

Baete has long-list of potential targets, including Zurich Insurance Group AG, Aviva Plc and RSA Insurance Group Plc, Bloomberg News reported last week.

A small deal wouldn’t make much difference to Allianz, which has a market value of 76 billion euros ($87 billion). But big deals mean large premiums. The standard top-up of 30 percent on a 5 billion-euro takeover would cost 1.5 billion euros. For a company the size of, say, Zurich, the equivalent would be 13 billion euros. AXA SA agreed to pay a 57 percent premium for XL Group Ltd. in March — and its shareholders are livid.

Faced with this dilemma, Baete recently floated the idea of a merger of equals in an interview with the Financial Times. But this would need a target willing to play the junior partner and agree to a combination at prevailing market values with no premium.

There would be synergies for sure — cost savings from slashing duplicate functions plus a capital benefit from diversification. Scale is also advantageous at a time when the industry is spending on technology like car sensors and apps that cut out brokers. Better, so the argument goes, for two firms to share the burden of investment than replicate it on identical projects.

Set against this is the higher than average disruption in financial services deals. Trustbusters could force disposals, shrinking the deal and its benefits. Arguing for a “European champion” to see off the Chinese bogeyman isn’t going to cut it, not yet at least. AXA and Allianz aren’t facing the same competitive pressures as, say, Alstom SA and Siemens AG.

For these reasons, targets will want a decent premium and buyers like Allianz will be wary of paying it. Zurich’s management has argued that the digitization of insurance means absolute size is no longer a benefit, although scale helps locally. A deal would dilute its very Swiss identity, making it a tough sell politically.

Aviva’s 20 billion-pound ($27 billion) market value means a takeover premium would be affordable. What’s more, the company is cheap, trading at only nine times next year’s estimated earnings. But its business mix wouldn’t do much to tilt Allianz away from life and pensions — unless Allianz could find a specialist life company willing to take that part off its hands.

RSA, worth 6.8 billion pounds, has no life business but its shares are already baking in a takeover premium. Allianz would still have to pay something more on top.

Baete can’t rewrite the rules of M&A. If he wants a deal and the target doesn’t, he’s going to have dangle a proper takeover premium. That applies to transactions big and small. Otherwise he could do worse than grow Allianz by improving its valuation, and letting shareholders find a use for his surplus capital.

[loganair] 19/6/2018 13:29

It a bid is forth coming personally I would be looking at between 730p and 750p.

[loganair] 19/6/2018 13:21

Adding to the above article...

Logical:

Olly Laughton-Scott, director of consultancy IMAS, stated that a large UK deal for Allianz would make sense.

He commented: “What we are seeing is dramatic broker consolidation so it is logical that this affects at the insurance company level.

“Consolidation is driving power to the brokers and making the relevance of insurance companies and standalones less relevant.”

He added: “There is also huge pressure on cost throughout the industry.”

With regard to Aviva and RSA being targets Laughton-Scott said they were also “logical”; if you consider the size of Allianz.

“If you are a big heavy beast like Allianz the number of targets which are meaningful are very limited so you will start large and then look lower. The logical place is to start at those two companies.”



Zurich and QBE were also named as potential targets. Laughton-Scott advised that Zurich sounds “less likely” and could not see Zurich selling a UK unit to a competitor.

QBE was a more credible prospect. He said: “I think QBE is interesting. Despite Brexit markets are looking more geographically focused and the UK part of QBE is not a daft idea.”

[loganair] 10/4/2018 16:09

Goldman Sachs today reaffirms its buy investment rating on RSA Insurance Group and set its price target at 715p.

[loganair] 22/3/2018 07:40

Credit Suisse gives an 'Out Perform' rating on RSA with a target price of 730p.

[loganair] 05/3/2018 12:53

The Bank of England has recently acknowledged that quantitative easing (QE) has resulted in “material reduction in UK company dividends and investment spending”.

The trouble is that QE drove down bond yields. In turn, that made pension deficits explode. (Put simply, if you’ve agreed to pay someone £100 a year, and interest rates are sitting at 10%, then you only need £1,000 sitting in the bank to generate that £100 a year. But if interest rates fall to 5%, then suddenly you need £2,000 to generate the same £100).

As a result, companies had to divert money that could have gone on productive investment and higher dividend payouts, used it instead to fund artificially-exacerbated pension liabilities. Overall the deficit of the combined 6,000 defined-benefit pension schemes in the UK is thought to have grown “to around £300bn by 2015, more than 15% of annual GDP… At the same time as deficits have risen, investment has been subdued”.

[loganair] 23/2/2018 17:16

It seems to me, until some thing major happens, the share price of RSA is going to struggle to get above 700p and will likely trade side ways in the 600p to 700p range.

700p takes the share price back to where it was in 2011 and in old money, before the 1 to 5 share consolidation is only 140p, when years ago the share price was over 600p in old money or £30 in to days share price.

[loganair] 23/2/2018 14:30

RSA has been told only a full sale will get best value for shareholders and selling bits of the business is not now beneficial.

Berenberg said today: ”The pension liability and loss of diversification benefits in its capital model mean disposing of any remaining operations is unlikely to be beneficial for RSA shareholders.”

Berenberg said in its note that chief executive Stephen Hester had hinted RSA’s different parts of the business together, when compared to peers, meant a valuation of £8.50 on share price, valuing the company at £8.7bn.

The firm is currently trading at £6.34, with a market capitalisation of £6.51bn.

But Berenberg said Hester way of valuing the business - called sum-of-the-parts - was ‘likely unattainable without a bid forthcoming’.

Elsewhere, Berenberg praised Hester’s transformation of the business and said it can double 2017 earnings to £540m by 2019, hitting an impressive combined ratio in the low 90s.

The bank analysts at Berenberg said RSA can now concentrate on operational improvement.

“All the boxes have been ticked; the balance sheet is in good order, leverage is at a suitable level; the company has a clear and rational footprint; and its operations are underwriting profitability,”; Berenberg said.

[loganair] 22/2/2018 12:54

By Alan Oscroft:


I’ve always liked the FTSE 100‘s top insurance firms as long-term generators of wealth, and though I don’t own any RSA Insurance Group (LSE: RSA) shares (I hold Aviva currently), I rate it as among the best.

Full-year results released Thursday show why, as the company boasted: “Premium income up 4% to £6.7 billion, combined ratio 94%, a new RSA record.“

RSA looks to be prospering under the leadership of Stephen Hester, who I rate as one of the Footsie’s top bosses (and whose surprise departure from Royal Bank of Scotland in 2013 was, in my opinion, bad news for the bank’s shareholders).

Though underwriting figures in the UK were poor, excellent results from the firm’s overseas operations (particularly in Scandinavia and Canada) helped push underlying pre-tax profits up 12% to £620m, with overall underwriting profit up 4% to a record £380m.

Premiums gained 4% to £6.7bn, though investment income dropped 10% to £331m, which RSA put down to “the impact of disposals and ongoing reinvestment at lower yields“.

Dividend cash:

The bottom line saw a 10% rise in underlying earnings per share (EPS), and the full-year dividend was lifted by 23% to 19.6p per share, yielding 3.2% on yesterday’s close of 613p. The shares rose 3% in early trading on Thursday to 632p.

The dividend is the most important bottom line item to me, as I see big insurance firms as long-term income generators. And since Mr Hester’s arrival in 2014, the restructuring he put into place has boosted my confidence in its long-term viability.

Earnings have been climbing steadily, and the dividend has bounced back from 2014’s troubled 2p per share. And with further EPS growth on the cards, the City predicts a dividend of 34p by 2019, to yield around 5.5%.

[loganair] 22/2/2018 12:49

Reflecting RSA's overall progress in 2017, a final dividend of 13.0p per share payable on the 18th May is proposed, making 19.6p per share total for 2017, up 23%. This represents a 45% payout of underlying EPS.

Analysts at Bernstein said the UK segment had disappointed, but RSA seemed focused on turning it around. They reiterated their “market perform” rating.

[loganair] 25/10/2017 16:44

RSA Insurance got a boost as JPMorgan Cazenove upgraded the stock to 'overweight' from 'neutral' as it took a look at the UK non-life sector.

The bank said its clear top pick in the sector is overweight-rated Direct Line, closely followed by RSA and then Hastings. It noted that RSA has underperformed in recent months, meaning the valuation is now attractive.

"We believe the pricing backdrop in commercial lines may improve following recent natural catastrophe events, and with additional capital return likely to commence from FY18E, RSA's income credentials could be meaningfully improved."

With relatively less upside to its valuations, the bank downgraded Admiral to 'neutral' from 'overweight' and Esure to 'underweight' from 'neutral'.

It said Admiral's slower growth in the first half was due to a temporary competitive disadvantage and although this will be removed in January, it nevertheless could continue to weigh on growth in the second half. "With no obvious catalysts on the horizon, and only modest upside to our valuation, we move to neutral."

[standish11] 25/9/2017 16:50

RSA Insurance Group PLC Update ahead of investor meetings
Intraday RSA Insurance Chart

Intraday RSA Insurance Chart
25/09/2017 3:53pm

UK Regulatory (RNS & others)


TIDMRSA

RNS Number : 7479R

RSA Insurance Group PLC

25 September 2017

RSA Insurance Group plc

25 September 2017

Update ahead of investor meetings

RSA will be meeting investors this week in connection with the Bank of America Merrill Lynch Annual Financials Conference.

Trading results for the third quarter to date have been positive, consistent with prior trends, across the Company with the exception of the UK business segment. Here, catastrophe losses from the US, Caribbean and Mexico will impact September results in the marine and international portfolios. At present losses notified are well below reinsurance limits though the final position will take some weeks to emerge. Otherwise UK underlying results in the quarter continue to reflect the challenges visible in H1, against which underwriting actions are being taken.

RSA will publish its Q3 Trading Update on November 2nd.

[fenners66] 25/9/2017 16:14

What happened?

[cerrito] 30/8/2017 13:57

I have been reviewing whether to lighten up given recent share price strength; also wondered if were impacted by Houston but having gone through recent financial reports can find no evidence that they do business in the US-either on a primary or reinsurance basis. Is that the understanding of all of you?
For now am holding

[loganair] 27/8/2017 13:26

RBC CAPITAL RAISES RSA INSURANCE TO 'OUTPERFORM' ('SECTOR PERFORM') - TARGET 750p (625p)

JPMORGAN RAISES RSA INSURANCE PRICE TARGET TO 700p (630p) - 'NEUTRAL'

[loganair] 25/8/2017 14:02

HSBC today reaffirms its buy investment rating on RSA Insurance Group(LON:RSA) and raised its price target to 745p.

[loganair] 02/8/2017 10:22

Barrie Cornes, analyst at Panmure which has a hold rating on the stock, said RSA's recent strong share price performance had cut the chances of an offer for the company after rival insurer Zurich (ZURN.S) abandoned a bid in 2015.

RSA said it would pay an interim dividend of 6.6 pence, up 32 percent but below a forecast 7 pence.

Hester told a media call the company was still on track to offer further cash to shareholders in 2018 through special dividends or share buybacks.

"The dividend upgrade we forecast did not occur," KBW analysts said in a note, though they reiterated their outperform rating on the stock.

[fenners66] 02/8/2017 09:27

Looks like that dividend yield is going to rise a bit today.

[loganair] 02/8/2017 08:46

I would say the share price fall is more to do with profit taking as the shares have risen quite sharply over the past few months.

[huttonr] 02/8/2017 08:28

At a quick glance, the results look good but obviously the market doesn't like them!

[fenners66] 19/7/2017 09:43

I think there is room for the dividend yield to rise here without necessarily a rise in the share price, after all traditionally the yield was higher than it is now.

[loganair] 19/7/2017 09:24

If the reported 30% upside potential comes to fruition would mean a 200p increase in RSA current share price to between 800p and 850p in the next 12-18 months.