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Aviva boss Amanda Blanc has defended the insurer’s £3.7bn swoop for Direct Line, insisting it would not harm competition, after UK regulators launched a probe into the deal this week.
The Competition and Markets Authority said on Wednesday that it was probing the takeover, with the combined group expected to control about a fifth of the UK motor and home insurance markets.
But Blanc insisted on Thursday that the deal would not harm consumers.
“Customers will speak with their feet, because there are so many providers,” Blanc told the Financial Times. “If they do not believe that you are providing value for money . . . they will go to other insurers, so we feel very confident as we head into the Direct Line deal.”
She added: “This is not a constrained product market. There are plenty of products, there are plenty of product providers.”
Consumers and government ministers have expressed concern about insurers profiting as premiums for motor cover rise. But Blanc said: “Analyse motor insurance profitability over a long period of time and you will see that there is not excess profit.”
The deal was agreed in December and some investors had come to doubt that it would be formally reviewed by the CMA, according to a note from analyst Jefferies. It added that while it had previously expected with “near certainty” that the CMA would approve the deal, it was no longer beyond doubt that the regulator would wave it through.
The deal could also be delayed, Jefferies said, due to the timeline of the CMA inquiry. The regulator said it could not guarantee that its decision would be announced by its July 10 deadline for completing the probe.
Aviva has said that it expects to complete the deal by mid-year and Blanc said on Thursday that the acquisition was still “firmly on track”.
Thomas Bateman, analyst at Mediobanca, echoed Blanc’s view that there is fierce competition in the UK market. “One of the issues that investors don’t like about UK motor insurers is [that] the competition is so high and the price transparency you get through price comparison websites is so high,” he said. “That is generally a good thing for the consumer.”
Aviva on Thursday reported its strongest first-quarter underwriting profit in its UK general insurance business since 2022, when insurers’ profits rebounded following the Covid-19 pandemic.
The FTSE 100 group’s combined ratio — a measure of claims and costs as a percentage of premiums sold — fell to 95.3 per cent in the first quarter for its UK general insurance business, a year-on-year improvement of 2 percentage points.
The combined ratio for the entire general insurance business, which includes Canada and Ireland, deteriorated to 96.6 per cent, from 95.8 per cent a year earlier. Revenue from general insurance premiums rose 9 per cent to £2.9bn.
Blanc said the improvement was driven by the company’s actions in previous years when it worked to control costs and keep prices high enough to remain profitable.
Jefferies said Aviva’s general insurance performance was “surprisingly strong” and resilient to industry-wide downward pressure on prices. In home insurance, the company had been “holding prices flat, even while peers are cutting”, Jefferies said.
