Zurich considering a bid for RSA Insurance

Swiss insurance company Zurich has confirmed that it is considering a bid for RSA insurance – the owner of More Than.

While Zurich noted that there is no assurance that an offer will be made, the firm did say in a statement: "Zurich notes the recent market speculation in relation to RSA Insurance Group and confirms that the company is evaluating a potential offer."

RSA is run by Stephen Hester, the former boss of Royal Bank of Scotland. The company has a market value of around £4.5 billion. Zurich is Europe's third-largest insurer and employs 55,000 people worldwide, including 7,000 in the UK. Last year, the firm revealed it had at least $3 billion (£1.9 billion) to spend on deals. The potential RSA merger would be the biggest deal for Zurich in 15 years.

Insurance consolidation

Recently, there has been a move towards consolidation in the insurance sector – and this is due to new European rules about the reserves that insurance companies must maintain. By merging insurance companies together, companies may be better able to diversify their revenue streams.

Earlier this month, Swiss insurer ACE tied up with Chubb, a US property insurer in a deal that was valued at $28 billion.

Following the announcement from Zurich, RSA shares went up 11.4 per cent in morning trading, bringing the value up to 488.3p. This also made the company the top riser on the FTSE 100.

However, shares in Zurich dropped 2.8 per cent, bringing the value of the company down to 43.3 billion Swiss francs (£28.9 billion).

A good fit

Analyst Kamran Hossain told the BBC that RSA could be a good fit for Zurich, especially considering the company's strength in a number of markets abroad.

"RSA has strong market positions in Scandinavia, in Canada, a large UK commercial franchise and operations in Latin America," he said.

He noted that the Scandinavian business would be of particular interest to anyone bidding on the company.

"Scandinavian insurance markets have oligopolistic characteristics, with few market players and strong profitability with low levels of competitions," he explained.