Jim Armitage: Aviva gets it right, but Zurich's RSA bid doesn’t make sense

 
Target: Zurich is considering a takeover bid for RSA (Picture: Toby Melville, Reuters)
Toby Melville/Reuters

So, insurance mergers can work.

In an industry with a history of fluffed integrations, Aviva is making a jolly good fist of Friends Life, as you’d expect from its turnaround chief Mark Wilson (the canny appointee of John McFarlane).

Synergies are flying in far quicker than expected long before the really big benefits are likely to arise in 2016-17.

Aviva itself is the result of some dubious mergers back in the day, of course: General Accident, Norwich Union and Commercial Union.

But the Friends deal always seemed a good fit, allowing Aviva investors to take on the former’s massive funds, fixing its lack of an in-house, asset-management giant and bringing in huge new cashflows.

Less easy to justify is Zurich’s expected offer for RSA — an even-more botched assembly of Royal Insurance and Sun Alliance — in the world of general, rather than life, insurance.

Zurich was banging on again this morning about what a good fit the pair would make (surely it’s about time we saw the colour of its money rather than just talk).

But, while it might make for a happy cash exit for RSA shareholders if the price is right, it’s something of a mystery why Zurich’s investors would want to accelerate their financial exposure to the cut-throat and cyclical British property and liability-insurance markets.

Perhaps accordingly, Zurich is now said to be working on a bid at more like 525p a share rather than the originally mooted 550p.

That would doubtless disappoint RSA’s shareholders no end, but it would perhaps more accurately reflect the lack of strategic rationale for the deal.

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