Comment: has RSA's failed bid for Aviva backfired?

It was surely meant to be like this: if RSA had taken over Aviva, it would have celebrated its 300th birthday perched at the top of the tree as the UK’s largest insurer.

Instead, the City is awash with rumours that RSA could lose its cherished independence to a takeover from a rival.

The latest speculation is that Zurich is interested in making a bid for RSA. Rewind a few weeks earlier and there was gossip that Finnish giant Sampo was on the hunt. The white noise just won’t stop.

Show no weakness

This is a classic example of what can happen when a company fails to take over its target.

Investors start asking awkward questions: why did you need to make the bid in the first place? Is there a weakness in your business?

So instead of RSA being a hunter, it is now seen as viable prey.

The irony is that RSA is fundamentally a very good business. It is performing well in a very challenging UK market, is well placed in emerging markets, and is led by a strong management team.

Testament to its strong performance is the fact that it is priced at 1.5 times net tangible book assets, against a market sector average of 1.1.

No easy target

Any business would have to pay a high price for RSA, at a time when the market is still soft.

And let’s face it, could Zurich’s management, which is in the middle of its own UK clean-up operation, really improve RSA? Doubtful.

Nevertheless, none of these considerations will stop the constant speculation about RSA being consumed by a bigger beast.

Chief executive Andy Haste and the RSA management have opened Pandora’s box, and they don’t know what’s going to happen next.