By the standards of Europe’s insurance behemoths, RSA, the former Royal Sun Alliance, is a minnow.
Swiss-based Zurich is valued at £46.6billion, France’s AXA at £35billion and Germany’s Allianz at a whopping £72billion against the £7.2billion value placed on RSA by joint Canadian and Danish bidders.
Indeed, with the Prudential having migrated most of its operations to Asia, and Aviva valued at a paltry £12billion-plus, the UK lags behind its European competitors.
Under the microscope: The defeatist conclusion is that RSA is not worth fighting for
The loss of leadership for British insurers is a curiosity. After all, RSA can trace its roots back to the Great Fire of London.
Lloyd’s of London was born in the 17th century coffee houses in the City, and both have heritage like no others.
In spite of a loss of scale among UK players, insurance services are hugely important to the nation, earning a trade surplus in excess of £17billion in 2019.
There is a view among most senior figures in British insurance that the plan to sell RSA doesn’t matter because the City has already sold the pass.
With the exception of the Pru, which recognised the value of China and the Pacific way back in the 1990s, the biggest players have at best chosen to focus on the domestic market and cut and run from a global presence, instead of investing heavily in new markets. The impatience of City investors for immediate returns, the ordeal of quarterly reporting and weak boards has encouraged this neglect.
The defeatist conclusion is that RSA is not worth fighting for. It is a bit player in a global market, and chief executive Stephen Hester’s plan to carve it up and sell it to Canada’s Intact Financial and Danish insurer Tryg is the best that can be achieved.
A handsome share price premium in a seriously undervalued FTSE 100 always will be welcome to investors who have no longer-term interest in the underlying assets, or indeed the broader public interest. What is really needed is determination in the City and on the board of RSA to take control of the UK’s insurance destiny.
It is a pity that Aviva is in transition with the arrival of former Lloyds banking finance chief George Culmer as chairman and Amanda Blanc as chief executive.
The share price is down around one-third from its 12 month peak and like much of the FTSE is suffering from a London discount.
There is talk of splitting Aviva so as to focus on separate life-asset management and general insurance arms.
UK insurance mergers don’t have a great reputation. But a better choice for the Aviva board might be to put together a friendly all-share merger with RSA, strengthening international reach and creating a British champion.
A deflated Aviva valuation doesn’t help. But it would be far better for UK plc in terms of jobs, corporate tax and global prospects if such a coup could be engineered.
The Financial Conduct Authority is not known for being firm or speedy of action.
So it is encouraging to see that it is lining up tough action against previous executives of contractor Carillion, which collapsed into insolvency in January 2018 leaving behind a terrible legacy, including the new Royal Hospital in Liverpool. The City regulator asserts that in the period from July 2016 to July 2017, the Carillion bosses released misleading financial data, creating a false market in the company’s shares.
The directors put out a positive spin when they knew that construction was deteriorating at a rapid rate.
Details were kept secret from the audit committee and the board so normal governance structures didn’t work.
Maybe, but it is worth asking why independent directors were not more forensic in their oversight. That’s why they get their fat fees.
The FCA concludes the unnamed directors were reckless. The fear must be that with the help of the best City lawyers, the directors concerned will tie the FCA up in knots and financial justice, in the shape of fines and bans, will be long delayed. Investors deserve better.
The City may see no value in heritage but Disney knows better.
To mark the upcoming birthday of the world’s favourite cartoon character next week, it will be releasing a new animated series, The Wonderful World Of Mickey Mouse, with roles for Minnie, Donald, Daisy, Goofy and Pluto in modern settings.
That’s sure swell.