Zurich considering a bid for RSA Insurance

<p>The swiss firm has confirmed it is considering a potential offer.</p>

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.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.