Has Haste left RSA vulnerable to takeover?

The City rumour mill was at it again last month, with RSA the name hot on investors’ tongues. The gossip was that RSA had received a takeover offer, called a meeting with top brass and rejected the bid.

Typically, RSA kept tight-lipped and the talk faded away. Perhaps it was nothing more than Chinese whispers, but what it shows is that many see RSA as a target for a bigger organisation. Zurich Financial Services, Finnish giant Sampo and US legendary investor Warren Buffett have all been touted as potential buyers in the past year.

It’s an image that RSA has been stuck with ever since chief executive Andy Haste failed in his bid to snap up the general insurance arm of Aviva this time last year.

Predator turned prey

RSA’s £5bn bid was not enough to tempt shareholders, and there was even confusion over whether RAC had been correctly included in their valuation.

Haste, known for his strategic vision, was expected to follow up with a second, bolder bid. Instead, there was nothing.

A year later and Haste has made the decision that, after eight years in the job, it’s time to go. But his departure, added to the Aviva failure, will once again reinforce the image of RSA as prey rather than predator.

Shore Capital analyst Eamonn Flanagan says: “Sadly the news will be dominated by the announcement that the chief executive, the hugely regarded Andy Haste, is to step down, to be replaced by the impressive Simon Lee.

“We expect this to lead to speculation over the corporate future of the group.”

Temporary reprieve

What makes a takeover of RSA less likely is Solvency II, as rival insurers are having a hard enough time figuring out their own capital requirements, let alone that of a potential large acquisition.

Also, a suitor might well have to issue shares to fund the takeover at a time when the stock market is down, the global debt crisis is still dragging on, and fears linger that the world is about to plunge back into a recession.

It remains to be seen whether RSA ends up being taken over, but in the minds of many in the City, thanks to Haste, RSA is fair game.

Haste’s legacy: what they say

Andy Haste is credited as having turned around the company since taking over from Bob Gunn in 2003. Haste implemented a disciplined approached to underwriting and claims in the UK, oversaw successful expansion overseas and made excellent selections in top personnel.

• Shore Capital analyst Eamonn Flanagan said: “He has left the group in wonderful shape with an excellent replacement.”
• UK chief executive Adrian Brown said: “Andy has been a fantastic leader for this business. If you look at what he inherited and the business we have now got, a lot of that is down to his leadership and his drive.”
• Lockton International chief executive Julian James said: “Under Andy’s leadership he has turned around the profitability of the company. He has made it a valuable business partner for us.”

RSA Group results 2002 - 2011.

Simon Lee: the new man in charge

• Lee spent 17 years with NatWest, starting as a management trainee and later becoming head of retail banking at NatWest Bancorp US and chief executive of NatWest Offshore.
• He also worked in the financial services consulting practices of KPMG and PricewaterhouseCoopers.
• He became chief executive of RSA Insurance Group International Businesses in April 2003
• He was appointed as RSA executive director in January 2007
• As well as his new role as RSA Group chief executive, Hall is also a director of RSA Canada and chairman of RSA Ireland, Codan Group and Trygg-Hansa.

Simon Lee: replacing Andy Haste