Aviva Shares Fell 1.25% After Acquiring Lloyd’s Probitas for £242M

The Aviva plc (LON: AV) share price fell 1.25% after announcing its strategic move into Lloyds's insurance market by purchasing Probitas for a sum of £242 million. This deal encompasses acquiring Probitas's comprehensive Lloyd platform, including its Corporate Member, Managing Agent, global distribution arms, and Syndicate 1492 rights. 

This acquisition marks Aviva's entry into Lloyds's market, significantly enhancing the scope and reach of its Global Corporate & Specialty (GCS) division. It aligns with Aviva's strategic focus on augmenting growth through targeted, high-quality acquisitions within its primary markets, particularly in areas that demand minimal capital investment yet promise substantial returns.

The move into Lloyds's market opens up many new opportunities for Aviva, granting access to a vast array of premium income potential, global licenses, and extensive distribution networks. It leverages Aviva's existing strengths in underwriting expertise, broker relations, and financial resources.

Probitas is distinguished for its speciality line focus, making it an ideal fit for Aviva's strategic objectives, offering congruence in product offerings, geographical presence, and risk management approach.

Syndicate 1492, part of the acquisition, reported a gross written premium (GWP) of £288 million in 2023 and has seen a remarkable 21% compound annual growth rate (CAGR) since 2019. It stands out as a leading performer in the Lloyd's market, showcasing an average combined ratio of 82% over this period. 

The company expects continued growth in 2024 through advantageous pricing, new product introductions, and increased distribution in pivotal markets. The acquisition will see Probitas's seasoned management team continue at the helm, maintaining the Probitas brand and dynamic, agile corporate culture. Aviva plans to support the team in driving profitable expansion.

With regulatory approval, Aviva aims to inject further capital into the Corporate Member to support Syndicate 1492’s growth and increase retained underwriting profits within the Probitas group.

The acquisition cost represents approximately 7 times the estimated 2026 post-tax IFRS operating profit, forecasting a high-teens internal rate of return (IRR). The expected impact on Aviva's Solvency II shareholder cover ratio would have been a decline of about 3 percentage points as of 31 December 2023.

The acquisition aligns with Aviva's capital management strategy, which remains steadfast. Aviva anticipates continuing to deliver regular, sustainable capital returns moving forward.

Aviva share price. 

The Aviva share price fell 1.25% to trade at 442.40p from Friday’s closing price of 448.00p but had recouped its losses.