The transaction marks a pivotal development for Aviva as it strengthens its position in the insurance market as it marks a significant milestone in the expansion and diversification of its General Insurance (GI) business.
With a consideration of £242 million, Aviva gains entry into the prestigious Lloyd’s market, a move that is poised to augment its Global Corporate & Specialty (GCS) footprint.
The GCS segment holds a pivotal role within Aviva’s UK GI business and stands as a strategic growth area for the entire Aviva Group. By venturing into the Lloyd’s market, Aviva opens doors to untapped growth opportunities, including access to substantial premium volumes, international licenses, and expanded distribution networks. Moreover, this strategic move aligns well with Aviva’s ambition to accelerate growth in its capital-light business units.
Probitas’s focus on specialty lines presents a unique opportunity for Aviva to enter the Lloyd’s market through a business that complements its strategic objectives in terms of product, geography, and risk profile. Syndicate 1492, Probitas’s standout performer within the Lloyd’s market, reported a gross written premium (GWP) of £288 million in 2023, showcasing a remarkable 21% compound annual growth rate (CAGR) since 2019. With an average combined ratio of 82%, Syndicate 1492 has consistently outperformed its peers at Lloyd’s.
Post-acquisition, Probitas’s experienced management team will continue to lead the business, maintaining the Probitas brand and its agile culture. Aviva intends to infuse additional capital into the Corporate Member to sustain Syndicate 1492’s growth trajectory and enhance underwriting profitability.
The acquisition, subject to regulatory approval, is expected to deliver attractive financial returns, with an estimated internal rate of return (IRR) in the high-teens. The acquisition price, equivalent to approximately seven times the estimated 2026 post-tax IFRS operating profit, underscores Aviva’s commitment to disciplined underwriting and profitable growth.
Despite a projected reduction of approximately three percentage points in the Group’s Solvency II shareholder cover ratio as of December 31, 2023, the acquisition remains consistent with Aviva’s capital management framework. Aviva anticipates regular and sustainable capital returns in the future.
Pending customary closing conditions and regulatory approvals, the transaction is slated for completion in mid-2024. As Aviva moves forward with this strategic acquisition, the company positions itself for enhanced competitiveness and sustained growth in the dynamic insurance landscape.
Amanda Blanc, Group Chief Executive Officer of Aviva, 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.”
Jason Storah, Chief Executive Officer of Aviva UK & Ireland General Insurance, also commented, saying: “This is a fantastic opportunity for both Aviva and Probitas. The Probitas track record, technical expertise and high-quality team will be an excellent addition to Aviva. They will continue to run the business post-acquisition and the Probitas brand will remain. We want to preserve their unique, agile culture and support the team to focus on delivering profitable growth that will benefit from leveraging Aviva’s own scale and capabilities.”
Ash Bathia, Chief Executive Officer of Probitas, added: “As Probitas embarks on the next stage of its evolution, it was important to find a partner with the financial strength and commitment to enable Probitas to optimise its potential and ambition to significantly scale up and diversify the business and take advantage of a unique opportunity to build one of the most successful and profitable franchises in the Lloyd’s market. I am convinced that Aviva is an ideal partner and I am truly excited about being part of the Aviva Group and the opportunities ahead for our business and staff.”
Source: Aviva
