Hester throws down gauntlet
RSA Insurance boss Stephen Hester threw down the gauntlet to Swiss suitor Zurich and other potential bidders with forecast- beating half- year results and a pledge to deliver further improvement as an independent company.
Hester, the former Royal Bank of Scotland chief executive brought in to turn around RSA after a string of profi t warnings and the discovery of a £ 200million black hole in its accounts, said the ball was in Zurich’s court.
Zurich, which said last month it was weighing up a potential offer, appeared to dampen hopes for a bumper bid price despite its chief executive Martin Senn suggesting a deal would bring “signifi cant benefi ts”. This hardline stance sent RSA shares 14p lower to 510p.
Senn said: “A transaction could bring signifi cant benefi ts to us and to our investors in terms of the complementary fi t of RSA’s business with our own operations and in financial terms. But any capital deployment would need to meet the same hurdles that we apply to any other investment.”
RSA, owner of the More Than brand, lifted operating profi t by 84 per cent to £ 259million, compared with a consensus forecast of about £ 230million, helped by the best UK underwriting results since 2006 on improved weather- related claims. Hester, pictured, said: “These results show excellent progress on all key measures. The foundations are being laid to improve still further. The dunce’s cap can be passed to someone else.”
Hester said RSA is ahead of schedule with its drive to cut costs by £ 250million by 2017 and hopes to have “substantially completed” its reshaping and disposal announcements by the time of its year- end results. Analysts had talked up prospects for a bid of at least £ 5.5billion but Zurich is believed to be considering pitching its offer at about £ 5.25billion.
Shore Capital’s Eamonn Flanagan said: “The gloves are off and the bidding process can start in earnest. RSA, with much better results than the market had expected, has thus thrown down the gauntlet to all- comers. In the other corner stands Zurich which can work on updated figures to ascertain how well the turnaround story is progressing.”
He said RSA has “a number of superb assets across the globe, namely in Canada and Scandinavia”, which could also appeal to the likes of Germany’s Allianz and Generali of Italy.