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Outlook: Royal & Sun set

EVER SINCE Bob Mendelsohn, the chief executive of Royal & Sun Alliance, stuck his exceedingly well paid head over the parapet earlier this year with his flat-footed bid for Guardian Royal Exchange, the City has been waiting for it to be shot off.

His intervention convinced GRE that it should settle for a rival bid from Axa. RSA was left looking outgunned and exposed. Axa meanwhile went on to demonstrate that it had achieved an astonishing good deal, flogging off enough of GRE to cover its costs while keeping the high growth health insurance arm, PPP, and some of the general insurance book.

Since then most pundits have been confidently predicting that it is only a matter of time before there's a bid for RSA as well. Unfortunately it has so far stubbornly failed to materialise, despite the best efforts of some of the finest brains in the investment banking fraternity to drum one up. CGU, the most obvious candidate, baulked at going hostile after being given the thumbs down on an agreed deal, and in any case now seems much keener on European bancassurance. Allianz, the German insurance giant, seems in little hurry to oblige. Meanwhile RSA's share price just goes down and down prompting one broker yesterday to liken poor old RSA to a road accident victim nobody wants to stop and help.

RSA is a classic old economy business that knows it has to change, but seems somehow unable to pull it off. At a time when rivals at home and abroad are building up their life and asset management operations, RSA remains more heavily weighted towards the most heavily commoditised end of the insurance business - property and casualty. Early autumn hope that the insurance cycle was about to turn for the better now seems to have been just another false dawn.

So far this year, Mr Mendelsohn has made two major acquisitions - Orion in the United States and Trygg-Hansa in Scandanavia - but neither have helped improve the life/general split by much. Mr Mendelsohn cannot personally be blamed for the abject failure of the merger in 1996 of Royal Insurance and Sun Alliance to deliver the benefits shareholders were promised.

At the time, he was running RSA's more successful American business. But the way the integration was botched still colours the group's investment standing. Some shareholders continue to believe that either Mr Mendelsohn's painstaking efforts to turn the ship around will come right, or that someone will take pity on them and bid. They may have a long wait.