Swiss inefficiency

21 September 2015 By George Hay Follow @gfhay

The Swiss insurer has binned plans to buy its UK peer – and issued a profit warning. A deal at the mooted 5.6 bln stg level could have worked, given RSA’s potential. If Zurich doubted RSA’s ability to recover, it shouldn’t have sniffed around in the first place.

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Zurich Insurance Group said on Sept. 21 it had terminated discussions with RSA Insurance Group, after it warned that its general insurance division would make a $200 million operating loss for the third quarter.

Zurich said the losses would be caused by a $275 million loss from the series of explosions in Tianjin in mid-August. It also expects a $300 million negative impact in the third quarter in relation to current and prior year exposure to other liabilities like U.S. auto.

Zurich’s New General Insurance CEO Kristof Terryn is now conducting a review of the general insurance business.

RSA said that Zurich had confirmed that its due diligence on an acquisition were in line with their expectations, and although incomplete the process had not found anything that would have prevented them proceeding with a deal.

It said Zurich’s interest had been unsolicited and RSA continued to make progress on its turnaround plan.

As of 0930 BST, Zurich shares were trading at 258.1 Swiss francs, down 1.6 percent. RSA shares were trading at 409 pence, down 19.7 percent.

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