ZURICH (Reuters) - Zurich Insurance Group AG ZURN.VX abandoned its proposed 5.6 billion pound ($8.7 billion) bid for British insurer RSA Insurance Group PLC (RSA.L) on Monday after forecasting a $200 million loss in its general insurance business due to explosions at the Chinese port of Tianjin.
Instead of buying RSA in a proposed transaction first announced in July, Zurich will focus on improving the performance of its general insurance business, it said in a statement.
With “recent deterioration in the trading performance in the Group’s general insurance business, Zurich...has terminated its discussions in connection with a possible offer for RSA,” Zurich said. “The group’s focus instead will be on taking the necessary actions to deliver on the required performance.”
Zurich announced aggregate losses of around $275 million from explosions at a container storage station in China. It said the final cost was uncertain.
The insurer also said recently completed reserve reviews indicate a likely negative impact of around $300 million in the third quarter for U.S. auto liability and other lines of business.
“Given the deterioration in profitability... General Insurance CEO Kristof Terryn is conducting an in-depth review of the business,” Zurich said.
The insurer said it remains committed to achieving its financial targets for 2014 to 2016 of an after-tax return on equity from operating profit of between 12 percent and 14 percent.
In addition to claims relating to the Tianjin port explosions, Zurich said that it expects weaker-than-expected profitability in the general insurance business in the first half of 2015 to continue into the third quarter.