Posted on Aug 18, 2010 by Sergio Ulloa
Aviva investors have started to question whether the refusal of the GBP 5 billion (EUR 4.13 billion) bid from RSA Insurance Group Plc
was the correct way forward, and this question is being addressed to Mr Andrew Moss, who three months after becoming the Chief Operating Officer of Aviva Plc back in July 2007, unveiled his "One Aviva Twice the Value" strategy. Fast forward to the present, and Aviva shares have lost almost half their value since then, prompting investors to ponder about the merits of a breakup of the company.
The market value of Aviva currently stands at GBP 11 billion (EUR 9.1 billion). The refused GBP 5 billion (EUR 4.13 billion) bid from RSA was for the general insurance division of Aviva, which sells auto and home-owners' coverage.
The challenge posed to Mr. Moss is to convince Aviva investors that more value can be created by him and his leadership, rather than from someone else coming from outside the company. The perception by analysts is that breaking up the company would give current shareholders more value than what they are getting now.
Online price-comparison websites, an ageing population and the slowdown in growth of the UK economy have been given as reasons for the lacklustre profits reported by British insurers during the past three years. In spite of this, the UK is the third most-insured country in the world even though the size of its economy occupies the sixth place globally.
Should RSA successfully acquire Aviva's general insurance businesses in the UK, Ireland and Canada they would become Britain's biggest non-life insurer, putting an end to Aviva's strategic goal of selling all types of insurance products. Aviva is the only major British insurer currently selling life and pension products alongside motor and home insurance.
Insurance Companies mentioned:
Europe's fourth largest insurance company, with more than 300 years of experience in the global insurance industry, Aviva is committed to the safety and satisfaction of its customers. They sell a broad range of insurance products including motor and property insurance, protection and health insurance, business insurance, life insurance and pensions.
RSA has a proud heritage dating back almost 300 years. The current company structure was created in 1996 following the merger of two of the largest insurance companies in the UK, Royal Insurance and Sun Alliance. In 2008 the company shortened their name to RSA and simplified and refreshed their corporate brand. RSA has over 20 million customers worldwide. The Group currently manages GBP 14.3 billion of investments. RSA is a member of the FTSE4Good Index. RSA employs around 21,000 people worldwide.