Zurich Insurance's £5.5 billion merger with RSA is OFF because of explosions in China

London-listed Zurich Insurance lost $275 million (£177 million) because of a series of explosions at a container storage station in the Port of Tianjin in China in mid-August 2015.

It has even cost the group its £5.5 billion ($8.5 billion) merger with RSA Insurance, with the Swiss company saying in a statement this morning (emphasis ours):

In light of the above recent deterioration in the trading performance in the Group's General Insurance business, Zurich announced this morning that it has terminated its discussions in connection with a possible offer for RSA. The Group's focus instead will be on taking the necessary actions to deliver on the required performance of the General Insurance business.

Zurich revealed in its preliminary third quarter update that its Zurich Insurance arm could be hit by further losses linked to the Chinese factory explosions because "the nature of many of the losses and the extended remediation period to complete repairs means that uncertainty as to the final cost remains."

It added that it will alert investors of the estimated net of reinsurance before tax on November 5, when it reports its final third quarter results.

In August this year, a warehouse containing large quantities of dangerous chemicals exploded in the port city of Tianjin. The Japanese meteorological agency said at the time that the explosions were so huge that they could be seen from space. It killed 50 people and injured 701. Fires continued to burn for nearly 24 hours after the explosion.

It was horrific:

Zurich said in the results statement that it now expects that "weaker than expected profitability in the General Insurance business in the first half of 2015 will continue in the third quarter."

On August 25, RSA Insurance announced that rival insurer Zurich had tabled a £5.5 billion ($8.6 billion) offer for the company, following takeover talks first announced last month. RSA's board said they were "willing to recommend the offer."

However, the explosions in China have changed all that.

General Insurance CEO Kristof Terryn will now conduct an "in-depth review of the business" due to the large losses associated to the Chinese explosions as well as further $300 million (£193 million) from prior liabilities in the US auto industry.

It reiterated though that it is committed to achieving its financial targets for 2014 to 2016, which are to get Zurich to an operating profit after tax and generate a return on equity of between 12% and 14%.