ZURICH (Reuters) - Zurich Insurance Group (VX:ZURN) will not overpay in any bid for Britain's RSA (L:RSA), it said as it posted an unexpected drop in second-quarter net profit.
The insurer said last month it was mulling a bid for RSA, which could top $8 billion (5.12 billion pounds), but Chief Executive Martin Senn stressed on Thursday a deal would only be possible if the Swiss company felt it was getting a fair deal.
"We believe that a transaction could bring significant benefits to us and to our investors in terms of the complementary fit of RSA's business with our own operations and in financial terms," Senn said in the earnings statement.
"But any capital deployment would need to meet the same hurdles that we apply to any other investment."
Net profit for the quarter fell 1 percent year on year to $840 million, compared to the average estimate for a 12.8 percent rise to $944 million in a Reuters poll of seven analysts.
In the three months to June 30, the insurer was hit by losses in Britain and its North American global corporate business, as well as higher levels of catastrophe and weather-related losses and higher expenses.
It reaffirmed its return on equity (ROE) target of 12-14 percent by the end of next year. It missed that goal in 2014. In the first half it was 11.6 percent.
It said cash reserves were expected to exceed $3.5 billion in 2015 and $10 billion for the 2014-2016 period. This is ahead of its previous mid-term target of $9 billion.
Zurich's general insurance combined ratio rose to 100 percent during the quarter from 95.7 percent a year earlier. A ratio below 100 percent means an insurer earns more in premiums than it pays out in claims.