RSA Profit Beats Estimates as Zurich Considers Bid

August 6 British insurer RSA, subject of a potential takeover bid by Swiss rival Zurich Insurance, on Thursday posted forecast beating pretax profits of 288 million pounds ($449.83 million).

City analysts expect Zurich to make an offer of around 550p per share. The FTSE 100 insurer, which has recovered from a string of profit warnings and an accounting scandal at its Irish unit, today reinstated its interim dividend with a payout to shareholders of 3.5p per ordinary share.

After a troubled period for RSA, today’s results affirm the impact of Hester’s so-called “action plan” which has involved a £775million rights issue, stripping back its Asian businesses and refocusing the group’s UK operations. Hester, the former CEO of Royal Bank of Scotland Group Plc, took the reins past year.

Stephen Hester, RSA Group chief executive, said: “We are making fundamental improvements to RSA, as promised”. The foundations are being laid to improve still further.

When Zurich confirmed its interest last month Panmure Gordon analyst Barrie Cornes said: “We think that RSA is now effectively in play”.

The company said the Group net written premiums were down 3 percent at constant exchange rates due to disposals, however Core Group premiums rose 2 percent on an underlying basis. Premium income has been stabilised, underwriting and cost levers are responding positively.

He added: “We are encouraged by the increasing momentum at this stage of our planned improvements”.

Zurich, which also reported interims today, said a deal with RSA would bring “significant benefits”, but added that “any capital deployment would need to meet the same hurdles that we apply to any other investment”.

The Swiss firm said that its second quarter results were hit by “large losses” in the UK and at its global corporate business in North America, and “higher levels of catastrophe and weather related losses”.

Zurich is Europe’s third-largest insurer and has often been linked with a bid for RSA.

It said in a trading statement it remained confident in meeting its medium-term performance targets.