Zurich Insurance Group evaluating a potential offer for RSA Insurance Group plc

Zurich-based Zurich Insurance Group reported Tuesday that it is evaluating a potential offer for RSA Insurance Group plc, but emphasizes the announcement “does not amount to a firm intention to make an offer and there can be no assurance that any offer will be made.”

Citing recent market speculation in relation to RSA, a Zurich statement confirms the evaluation and notes “a further announcement will be made as appropriate.”

RSA, for its part, “has not held talks with or received a proposal from Zurich and shareholders are advised to take no action,” adds a statement from the company. “RSA looks forward to updating the market on trading performance and strategic progress at the interim results announcement on 6 August 2015,” it continues.

“In accordance with Rule 2.6(a) of the Code, Zurich is required, by not later than 5.00 p.m. on 25 August 2015, to either announce a firm intention to make an offer for RSA in accordance with Rule 2.7 of the Code or to announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies,” the statement notes.

“An Opening Position Disclosure must contain details of the person’s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s),” it adds.

As a multi-line insurer that serves customers in global and local markets, Zurich has more than 55,000 employees and provides a wide range of general insurance and life insurance products and services to businesses and individuals in more than 170 countries.

In Canada, Zurich is focused on developing unique solutions for large Canadian corporations; Canadian-based multinationals; Canadian businesses in manufacturing, real estate, technology, public sector, transportation and construction; and groups and associations in niche markets, notes information posted on Zurich Canada’s website. “In Canada, we conduct business exclusively through a network of independent insurance brokers,” it adds.

RSA is multinational quoted insurance group with operations in the United Kingdom, Scandanavia, Canada, Ireland, Asia and the Middle East, Latin America and Central and Eastern Europe. It has the capability to write business in approximately 140 countries and, focusing on general insurance, had net written premiums of £7.5 billion in 2014.

In Canada, the 2015 edition of the Canadian Underwriter Statistical Issue shows that Zurich Insurance Company Ltd. ranks 14 among private property and casualty insurance companies by total business; RSA Canada Group ranks 4.

The market percentage is 1.66% and 6.18, respectively, with 2014 net premiums written (NPW) at 744,723,000 for Zurich and 2,765,167,000 for RSA Canada. For Zurich, NPW increased 7.4% in 2014 from 693,440,000 in 2013, while NPW for RSA decreased 0.91% from 2,790,693,000 in 2013.

Intact Financial Corporation – at 6,875,276,000 in NPW for 2014 – is far ahead of Aviva Canada Inc. ranked second, at 3,838,980,000. The remainder of the Top 10 general p&c insurance companies (private sector) are TD Insurance (General Insurance), RSA Canada Group; Lloyd’s Underwriters, Co-operators General Insurance Company, Desjardins General Insurance Group, Wawanesa Mutual Insurance, Economical Insurance and State Farm Insurance Company.

There has been a lot of mergers and acquisitions activity of late involving insurers and reinsurers, both globally and at home.

In late June, for example, Chubb Corporation entered into “an agreement and plan of merger with ACE Limited, under which ACE has agreed to acquire Chubb for US$62.93 in cash and 0.6019 of a share of ACE common stock for each share of Chubb common stock.” The transaction is estimated at US$28.3 billion.

Other recent examples include XL Group Plc’s acquisition of Catlin Group Ltd. and Toronto-based Fairfax financial Holdings Ltd.’s announcement that it has completed its cash tender offer to shareholders of Brit Plc.

Related: Active M&A market for Canadian p&c insurers shows no sign of slowing, A.M. Best says

A.M. Best notes in a report earlier this month that an influx of alternative capital into the reinsurance market, low interest rates and a desire for geographic expansion are among the factors driving M&A in the insurance industry. “A.M. Best expects industry consolidation to remain at the forefront of the management agenda as companies attempt to drive cost efficiencies, diversify both geographically and by product and increase market share,” the report adds.

In Canada, big deals over recent years have included Desjardins General Insurance Group’s $1.6 billion acquisition of the Canadian operations of State Farm (to bring the insurer’s ranking to three), The Travelers Companies, Inc. $1.1 billion acquisition of The Dominion of Canada General Insurance Company from E-L Financial Corporation Limited and Intact Financial’s $2.6 billion acquisition of AXA Group’s Canadian operations.

Looking at the Canadian market specifically, an A.M. Best report in June states that ongoing performance pressures in Canada’s p&c market, combined with the need for scale and long-term strategic positioning continue to drive consolidation in the sector. In 2014, Canada’s top 10 p&c writers, as ranked by A.M. Best, generated 66.2% of the market’s direct premium, compared with 56% in 2007.

“Given the overall market dynamics, ongoing weather volatility, competitive market pressures and low interest rate environment, additional consolidation within the Canadian P/C market remains highly likely, showing no signs of slowing,” notes A.M Best.