Zurich Allied, the Swiss-listed joint-holding company of Zurich Financial Services, which owns Eagle Star, was steady yesterday after a strong run on Monday amid rumours that the group might be interested in buying insurer Royal & Sun Alliance.

Zurich's stock rose by 12 Swiss francs (€7.47) or 1.3 per cent after the Sunday Telegraph and Sunday Business newspapers in London reported that the group was preparing to launch a bid for Royal & Sun in the new year. Zurich, one of the world's largest insurers, was reported to be preparing to offer £7 billion sterling (€11.2 billion) for Royal & Sun.

If successful, the new entity would trigger further consolidation in the Irish market, creating the largest general insurer in the State with a 22 per cent share of the market, a stake worth £309.6 million (€393 million) on 1998 figures, the latest available.

This would put the firm ahead of Guardian/PMPA, which had a 19.1 per cent share worth some £268.2 million in 1998, and its nearest rival, Hibernian and CGU Group, which are set to join in 2000 following an agreed offer by CGU which already has acceptances from most Hibernian shareholders. Hibernian/CGU will have an 18.6 per cent share of the general market.

Royal & Sun Alliance, which employs 600 workers here, is currently the third largest insurer in the State, with a 13.1 per cent share worth £184.3 million in 1998. Eagle Star's 8.9 per cent share was worth £125 million in 1998. The company also has a 6.4 per cent share, worth £213.5 million last year, in the life and pensions market.

Analysts said Zurich's and Royal & Sun's operations would be complementary in continental Europe and Scandinavia, while a joint business would help Zurich make a bigger dent in the US.