Insurer, Aviva rejects £5 bn offer by RSA for General Insurance
Insurer Aviva (LON:AV.) today confirmed that on 28th July it received a conditional proposal from Royal & Sun Alliance Insurance Gr (LON:RSA) to acquire its general insurance businesses for a cash consideration of £5bn funded entirely from a rights issue by RSA. The proposal would have left the pension liabilities of the GI Business with Aviva as well as the general insurance businesses in the Netherlands, France, Italy, Poland, Turkey and Singapore. The Board of Aviva considered the proposal carefully in conjunction with its advisers and is convinced that the highest value to shareholders will be delivered by retaining these businesses within the group.
In considering RSA's proposal, the Board of Aviva had particular regard to the following:
- As part of its normal planning process the Board, supported by external advisers, recently completed a strategic review and concluded that having both Life and Non-Life businesses delivers significant capital and earnings benefits and that there are further synergies to be realised over the short to medium term.
- Aviva said as the leading general insurance business in the UK and Ireland, and the number 2 player in Canada, it should be valued accordingly.
- The general insurance market is presently at a cyclical low.
Accordingly, the current business performance does not reflect its full earnings potential. For example, Aviva's general insurance businesses in aggregate made operating profits of £1.0bn in 2009 compared to £1.7bn in 2006. Aviva said its recent 2010 first half results demonstrated the significant momentum delivered by management's actions, with a material improvement in current year profitability, ahead of the market recovery occurring. Aviva said the GI busineess is highly cash generative and supports growth in the franchise alongside a healthy and increasing dividend for shareholders. Accordingly, it decided unanimously that RSA's proposal was unacceptable and not in the best interests of Aviva shareholders. Lord Sharman, Chairman, said:
"The Aviva Board considered RSA's proposal carefully with a clear focus on maximising value for Aviva shareholders. Given the compelling strategic and financial benefits to Aviva shareholders of retaining the GI Business, its upside potential and the terms offered by RSA, the Board was unanimous in rejecting this proposal."
Andrew Moss, Group CEO, added:
"The progress we're making in reshaping and transforming Aviva was evident in the 21% increase to £1.27bn of operating profits at our interim results and we firmly believe this strategy will continue to deliver superior value for our shareholders."
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Aviva plc (Aviva) is an insurance group engaged in provision of products and services, such as long-term insurance and savings, fund management and general insurance. Aviva provides over 43 million customers with long-term insurance and savings, general and health insurance, and fund management products and services. Its business is managed on four geographic regions: United Kingdom, Europe, North America and Asia Pacific. The four regions, together with Aviva Investors, function as six operating segments. The UK region is split into the UK Life and UK General Insurance segments, which undertake long-term insurance and savings business and general insurance, respectively. Its products and services include long-term business, general insurance and health, fund management and other activities. In January 2012, it sold Aviva Czech Life, Aviva Hungary Life and Aviva Romania Life & Pensions to MetLife Inc. In April 2013, it transferred its holding in Spanish joint venture Aseval to Bankia. more »
RSA Insurance Group plc is the holding company of the RSA group of companies whose principal activity is the transaction of personal and commercial general insurance business. The Company operates in four segments: Scandinavia, Canada, United Kingdom and Western Europe, and Emerging Markets. The Company provides insurance covers for a range of renewable energy technologies, including Wind Energy, which includes onshore and offshore facilities; Solar Energy, which includes photovoltaic, concentrated and thermal installations; Small Hydro, which includes power stations producing an output up to 50 megawatt, and Bio energy, which includes Biomass, Biogas and Waste to Energy plants. The Company works with both large and small brokers. The Company works with partners, such as building societies, banks, retailers, motor manufacturers, charities, utilities and unions to offer their customers appropriate insurance products. more »
