Allied Zurich to quit FTSE 100 in move to consolidate capital

Allied Zurich, the insurance company, is to disappear from the FTSE 100 index after plans were announced yesterday to unify it with its partner Zurich Allied into a single Swiss holding company.

The company said that the move would make it easier for it to participate in industry consolidation and take a New York listing.

Tom Bennett, an analyst at BNP Paribas, said that the announcement made it far less likely that the group would target British acquisition opportunities. The company has been linked, in the past, with a bid for Royal & SunAlliance.

"You don't give up a FTSE 100 listing prior to bidding for a British company. Royal & Sun is even more dead now as a possible deal," he said.

Analysts pointed to the United States as the likely hunting ground for the group and they said that the New York listing should be seen as part of that plan.

The two companies will be merged into Zurich Financial Services, their parent, with the Swiss Zurich Allied holding 57 per cent of the new group, and Allied Zurich holding the remainder.

The new group will be domiciled in Switzerland, with the primary listing in Zurich and London as a secondary listing, making it ineligible for the FTSE London indices.

Zurich Financial Services has worked with a dual share structure since it merged with the financial services arm of British American Tobacco in 1998. However, the company has been frustrated by the fact that the London-listed entity, Allied Zurich, has traded at a discount averaging nearly 13 per cent to Zurich Allied, which is quoted in Switzerland.

Lord Cairns, chairman of Allied Zurich, said: "We devised the dual structure at the time of the merger to allow UK shareholders to remain relatively undisturbed.

"Having integrated the two businesses, we are at the next stage in the process and we now need to integrate the share structure."

Allied Zurich said that it recognised that yesterday's announcement may trigger selling from index-tracking funds and so was prepared to put $1bn (£617m) behind a shares buyback to support Allied Zurich's shareprice.

Allied Zurich shareholders will also be give a special cash dividend of 40p a share to compensate for this effect.

The company's shares yesterday closed down 6.5p at 678.5p.