Comment: Zurich cashes in RSA acquisition policy

YOU just cannot insure against some things. Shares plummeted in RSA yesterday after its proposed £5.6 billion takeover by rival insurer Zurich collapsed. The Swiss giant revealed that it was pulling out of the talks as it disclosed a $275 million (£177m) provision for the major explosions in mid‑August at a container storage station in the Chinese city of Tianjin.

They killed hundreds of people and left hundreds injured. Zurich also blamed weaker‑than‑expected profitability in its general insurance division extending into the third quarter for its decision to walk away from the RSA deal.

In addition, the company said that a review of its US motor business will mean another $300m hit. The timing of events was not particularly kind to the suitor. Zurich signalled it was weighing an offer for the British company on 28 July.

It came in with a firm proposal on 25 August, but sandwiched in between were the sad events at Tianjin. Zurich’s withdrawal must be particularly disappointing for RSA chief executive Stephen Hester, former boss at Royal Bank of Scotland.

Hester has been steadily cleaning up the stables at RSA since taking over in early 2014 after a series of profit warnings, flogging off unwanted businesses and improving profitability.

A sale of the business to Zurich at a decent premium would have rounded things off neatly, but it was not be. RSA wasted no time yesterday in stressing that due diligence for the takeover by Zurich has unearthed nothing murky in its books.

There was a half-decent chance that a merger of the two insurers, including costcutting and revenue synergies, would have been a case of the new insurance entity being more than the sum of its parts.

But for now it looks like both Zurich and RSA will have to re‑focus their efforts on sharpening organic capital returns.

Pas tres chic at French Connection

LOSS-MAKING retailer French Connection remains a restructuring work in progress. There is little to suggest shares are worth a punt until the company is much farther down that line. For would-be investors, better to stay disconnected for at least a year or two.