6th Nov 2020 09:34
(Alliance News) - The board of RSA Insurance Group PLC on Friday backed a GBP7.2 billion takeover proposal from a two-headed consortium that would see the company split up geographically.
London-headquartered general insurer RSA on Thursday confirmed Canadian insurer Intact Financial Corp and Danish insurer Tryg AS had made a proposal to buy the FTSE 100-listed firm and divide it up between them.
On Friday, it said Intact would pay GBP3.0 billion and take RSA's Canada and UK & International business, while Tryg would pay GBP4.2 billion and take the Sweden and Norway operations. The pair would co-own RSA's business in Denmark.
The proposal comprises 685 pence in cash per RSA share, plus payment by RSA of the announced interim dividend of eight pence per share. RSA closed at 670.00p on Thursday, jumping in the final minutes of trading from its quote of 452.60p just 10 minutes prior to the close.
Shares in RSA were down 1.6% at 659.00 pence in London on Friday morning, giving GBP6.82 billion market capitalisation. The stock now is up 17% so far in 2020.
"The board of RSA has indicated to the consortium that it would be minded to recommend the proposal, subject to satisfactory resolution of the other terms of the proposal, including a period of due diligence which is currently underway by the consortium," RSA said.
It cautioned, though, that there is no certainty that a formal offer will be made. The consortium must, by December 3 at the latest, announce either a firm intention to make an offer or its intention not to do so, unless an extension is granted.
RSA said Tryg would seek to finance its portion of the takeover primarily with a rights issue in 2021, while Intact would make an equity private placement, plus debt and preference share issues.
Earlier Thursday, RSA had said its business operating profit was higher in the first nine months of the year, though noted a dip in net written premiums.
Business operating profit for the nine months ended September was higher with, as guided, "a significantly improved combined ratio and lower investment income".
This was despite fully reserving for the UK business interruption court case in September, in which the UK High Court sided with policyholders, requiring UK insurers to pay out on most Covid-19-related business interruption claims.
Excluding Covid-19 impacts, all three of its regions performed on or ahead of RSA's plans.
The firm began the second phase of its UK cost programmes during the third quarter and booked GBP14 million of charges below the operating result as a consequence.
Investment income was within RSA's 2020 guidance range and its exit portfolios generated a modest GBP6 million of further loss in the quarter.
Net written premiums totalled GBP5.66 billion, a 35 drop versus year-to-date 2019, though was flat excluding estimated Covid-19 impacts.
As at September 30, tangible shareholders' equity was GP3.35 billion, having been GBP2.91 billion at the end of 2019. Tangible net asset value per share was 323 pence at September end, up from 282p.
By Anna Farley; [email protected]
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