As it targets markets in which it believes it has “scale or competitive advantage,” Aviva has announced a significant acquisition this morning – swooping for Irish insurer Friends First Life Assurance Company.
The deal is set to make Aviva one of the largest composite insurers in Ireland with its market share in life insurance leaping to 15% alongside its existing dominance of the general insurance market in the country – it is already the market leader with a 15% share.
The deal, reportedly worth 130 million euros (approximately NZ$221.7 million), is said to represent a 0.8X value of Friends First’s net asset value with Aviva expecting the group’s operating return on capital hurdle from year one and to significantly surpass the hurdle thereafter.
“Friends First is a natural fit for Aviva Ireland,” commented Maurice Tulloch, CEO of Aviva International insurance. “The acquisition will enhance Aviva Ireland’s product offering and accelerate our international growth agenda. It makes sense financially, strategically and for our customers.
“Our Irish business has been among the best performers in the Aviva group over the last couple of years. This acquisition underlines Aviva’s disciplined approach to deploying capital into bolt-on acquisitions that meet our strict financial criteria and strengthen our businesses.”
In a release announcing the acquisition, Aviva highlighted the recovery in the Irish economy and the fact that the life insurance market in the country has grown by c.9% since 2014. Meanwhile, Aviva Ireland has itself enjoyed strong growth – operating profits have leapt 12% in the first half of this year.
It noted that Friends First, currently owned by Achmea Holding NV, of the Netherlands, has operated in Ireland for more than 180 years with over 250,000 customers.
“I look forward to welcoming the Friends First employees to the Aviva group,” said John Quinlan, CEO of Aviva Ireland. “Friends First is an excellent business and will be a great addition to Aviva Ireland. Their expertise in the area of income protection and group risk, in particular, will complement and strengthen the broad range of insurance products we offer our customers. It will also make us the leading insurer for brokers in the Irish market. Together, our market leading insurance business will be well placed to take full advantage of Ireland’s fast growing economy.”
The transaction remains subject to regulatory approval and is expected to complete in the first quarter of 2018.
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