News of Aviva acquiring AIG’s UK protection arm came as a bit of a surprise towards the end of September.
But perhaps it shouldn’t have done. Industry insiders tell me that rumours had been doing the rounds, as is often the case with such deals.
The US insurance firm even hinted of a sale earlier in the year. Yet, from what I can gather, it seemed to attract little attention this side of the pond.
The FCA may be interested to see how things play out. Especially with the Consumer Duty now live
Maybe we should have been keeping a closer eye? We could have at least had a stab at potential bidders.
It’s not as if we’ve been short of protection businesses being snapped up by rivals in recent times.
Canada Life announced its intention to exit the individual protection market in November last year. It sold up to Countrywide Assurance in May.
Meanwhile, Royal London has acquired Aegon UK’s individual protection book. The signs were there.
Of course, things could change. The AIG transaction is by no means a done deal. The usual regulatory approval is required. Could the Competition & Markets Authority be minded to take a look? I wouldn’t rule it out.
Some feel the deal could be a good move, although they stress Aviva will need to do the ‘right thing’ and keep the best parts of AIG
Aviva is already a large player in the UK protection market. If the deal goes ahead, its share of the pie gets bigger.
Is that good news for customers? As with many of these events, there are mixed views.
The Financial Conduct Authority may also be interested to see how things play out. Especially with the Consumer Duty now live.
More bidders?
It’s not too late for other potential buyers to swoop in with an offer. Money Marketing gathers that private equity firms may be circling. Bain Capital has come up in conversation. It was keen to buy LV= back in late 2020 but LV= members had none of it.
Editor’s view: When did the course of true love ever run smooth?
Having been knocked back, could Bain have picked itself up and set its eye on AIG? Apparently not.
Would Aviva roll over and let another company purchase AIG Life UK anyway? It’s made an offer of £460m to take AIG from Corebridge Financial, a quoted subsidiary of American International Group.
It’s not as if we’ve been short of protection businesses being snapped up by rivals in recent times
Aviva group chief executive Amanda Blanc says the deal will bring “significant strategic and financial benefits”. It will strengthen the firm’s prospects in the “highly attractive UK protection market” and continue to reposition the group towards “capital-light growth”.
The transaction will broaden distribution and add 1.3 million individual protection customers and 1.4 million group protection members, Aviva says.
That’s not to be sniffed at. But every company has its limits for what it’s prepared to pay for something. Has Aviva reached that already without a bidding war?
Could the Competition & Markets Authority be minded to take a look? I wouldn’t rule it out
Some strong views have been expressed in the protection market itself. Protection Guru founder Ian McKenna, when welcoming guests to the Protection Guru Awards on 6 October, went so far as to say he hoped the deal wouldn’t go ahead. I’m sure many in the room agreed.
Others argue it won’t have a detrimental effect on competition. Instead, they suggest the UK has one of the most competitive protection markets. They don’t envisage that changing soon.
Some I spoke to sit in between. They feel the deal could be a good move, although they stress Aviva will need to do the “right thing” and keep the best parts of AIG.
When Aviva published details of the acquisition on the morning of 25 September, it outlined how AIG would complement its own approach. It highlighted the firm’s focus on innovative solutions and strong partnership distribution.
Every company has its limits for what it’s prepared to pay for something. Has Aviva reached that already?
“The combined protection business will benefit from AIG Life UK’s successful SME and high-net-worth propositions, and will reach more customers through AIG Life UK’s relationships with regional and corporate IFAs, as well as other key partners,” said Aviva.
“The combined businesses will create a more efficient platform from which to serve existing and new customers.”
Should all go ahead as Aviva hopes, the deal is expected to close in the first half of 2024. I’ll be keeping an eye out for MM’s coverage, but you won’t be hearing from me directly.
Katey Pigden is the previous editor of Money Marketing
This article featured in the Dec 2023/Jan 2024 edition of MM.
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