RSA’s strong results pose threat to Zurich takeover

RSA boss Stephen Hester threw down the gauntlet to potential predator Zurich by saying the ball is in its court.

Horse-trading over a possible multi-billion pound takeover began as insurer RSA recorded a surge in profits while its wouldbe Swiss suitor announced disappointing results.

Analysts had predicted a bid at 550p a share, valuing RSA at £5.5bn. But it is thought that Zurich may be planning a lower bid of 525p a share.

RSA’s market value suffered and there are now concerns that the prospects of a deal have receded.

Hester ( pictured) did not comment on the potential takeover, abiding by the strict Takeover Code.

But he said the FTSE 100 firm has ‘passed the dunce’s cap to someone else’ and become a ‘more valuable company’ as its turnaround gathered momentum. Profits for the first half almost quadrupled to £288m and operating profits jumped 84pc to £259m.

Hester said the firm had benefited from good weather as last year insurers were hit with hefty claims bills in the same period, after serious flooding.

This means that for the first time in two years RSA is turning a profit from selling insurance policies. Hester said plans to cut costs by £250m by 2017 were ahead of schedule and said results were excellent.

He said: ‘We feel we are back in respectable territory with our financial results.’

Zurich reported a 1pc dip in profits for the April to June period. Chief executive Martin Senn stressed he would only buy RSA if he got a fair deal. Shares in RSA fell more than 2pc, by 14p, to 510p, amid concerns that a takeover is less likely.

‘In the short term, we expect RSA to trade based on the probability of a takeover bid, rather than fundamental valuation,’ Bernstein analysts said. ‘Hence, on balance we expect the stock to trade down in the very short term.’

But Eamonn Flanagan from Shore Capital said little had changed and that a deal is very much on the cards.