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(Alliance News) - Aviva PLC on Monday returned to the Lloyd's of London insurance market for the first time in over two decades after it announced the GBP242 million acquisition of Probitas.
The London-based insurer exited Lloyds in 2000, when the firm – then known as Norwich Union – merged with CGU, itself formed by the combination of General Accident and Commercial Union in 1998.
Aviva said the deal is consistent with its strategy of executing high quality, bolt-on acquisitions in core markets to accelerate growth in capital-light businesses.
Strong financial returns are expected, supported by disciplined underwriting and profitable growth, the firm asserted.
Chief Executive Amanda Blanc said: "This acquisition is another step in our strategy to invest in Aviva's future profitable growth. Aviva's presence in the Lloyd's market opens up new opportunities to accelerate growth in our capital-light General Insurance business".
Aviva pointed out the acquisition price is equivalent to around 7 times estimated 2026 post-tax IFRS operating profit, and the transaction is expected to deliver a high-teens internal rate of return.
The estimated impact on the group's solvency II shareholder cover ratio would have been a reduction of around three percentage points as at December 31 2023, Aviva said.
Aviva described Probitas as a "top performer within the Lloyd's market".
It said the deal includes the acquisition of Probitas's fully-integrated Lloyd's platform, encompassing its corporate member, managing agent, international distribution entities and tenancy rights to syndicate 1492.
Aviva noted syndicate 1492 reported gross written premium of GBP288 million in 2023 and has delivered a 21% compound annual growth rate since 2019.
During this period, the business has consistently been a top performer within its Lloyd's peer group, achieving an average combined ratio of 82%.
Strong growth is expected to continue during 2024, driven by favourable pricing trends, new product lines and expanded local distribution in key markets, Aviva continued.
"Given Probitas's focus on specialty lines, the transaction represents a unique opportunity for Aviva to enter the Lloyd's market via a business that is well-aligned with Aviva's strategy in terms of product, geography and risk profile", the company added.
Aviva said the deal significantly expands market opportunity for Aviva's Global Corporate & Specialty business, seen as a key pillar of Aviva's UK General Insurance business and a strategic growth segment for the group as a whole.
"The Lloyd's market represents a major source of untapped growth for Aviva, offering access to significant in-appetite premium volumes, international licences and broader distribution networks. It will also allow Aviva to capitalise on its existing underwriting capabilities, broker relationships and capital base," the company added.
Aviva said the acquisition is consistent with its capital management framework, which remains unchanged.
Aviva continues to anticipate further regular and sustainable capital returns in the future.
The deal is expected to close in mid-2024.
Shares in Aviva were down 0.3% to 446.50 pence in London on Monday.
By Jeremy Cutler, Alliance News reporter
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