
Aug
16
RSA Bid for Aviva's UK General Insurance Unit Rejected
Posted on Aug 16, 2010 by Sergio Ulloa (G+)
RSA has been reported as having made a GBP 5 billion (USD 7.8 billion) bid for Aviva's general insurance business in the UK, which has been turned down by Aviva's board. Aviva shares jumped over 5 percent on the news. RSA has previously targeted much smaller companies for acquisition, such as their purchase earlier in August of Irish insurance company 123 Money Limited. Considering that RSA's market capitlalization stands only at GBP 4.4 billion (USD 6.9 billion), the purchase of Aviva's general insurance unit at GBP 5 billion (USD 7.8 billion) would more than double the size of the company, making the financing of such an acquisition both challenging and risky. Aviva is Britain's only major composite insurance company, offering general insurance and health insurance as well as life insurance and pension funds. While some analysts see Aviva's constituent businesses as possibly ripe for the picking, given that pre-tax profit in Aviva's general and health insurance business fell 3.7 percent year-on-year for the first half of 2010 to GBP 525 million (USD 820 million). However, with the general and health insurance unit accounting for more than 24 percent of Aviva's pre-tax operating profit, some see the unit as being strategically important, as it is a vital source of money to finance growth in Aviva's life insurance business. Considering the fact that Aviva's total pretax profit grew 21 percent year-on-year in the first half of 2010, and has already signed two major bancassurance deals with RBS and Santander, the latter of which includes a general insurance relationship, it seems unlikely that Aviva would be willing to make the deal. Insurance Companies Mentioned: Aviva
