Aviva plc (LON:AV) has announced the acquisition of Probitas1 for consideration of £242 million2. The transaction 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.
• Entry into Lloyd’s market via acquisition of a high quality, fully-integrated platform
• Significantly expands market opportunity for Aviva’s Global Corporate & Specialty (GCS) business
• Consistent with Aviva’s strategy of executing high quality, bolt-on acquisitions in our core markets to accelerate growth in our capital-light businesses
• Strong financial returns expected, supported by disciplined underwriting and profitable growth
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.”
Entry to Lloyd’s market will diversify and expand Aviva’s GCS footprint
GCS is a key pillar of Aviva’s UK General Insurance (GI) business and is a strategic growth segment for the Aviva Group. Additionally, it supports the Group’s ambition to accelerate growth in its capital-light business units.
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.
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.
Acquisition of a top performer within the Lloyd’s market
Syndicate 1492 reported gross written premium (GWP) of £288m in 2023 and has delivered a 21% compound annual growth rate (CAGR) 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%3. Strong growth is expected to continue during 2024, driven by favourable pricing trends, new product lines and expanded local distribution in key markets.
Experienced and capable management team
Probitas’s experienced and capable management team will continue to run the business post-acquisition and the Probitas brand will remain in use. Aviva’s ambition is to preserve the business’ unique, agile culture and empower the management team to focus on delivering profitable growth.
Attractive financial returns underpinned by disciplined underwriting and profitable growth
Subject to regulatory approval, Aviva’s intention is to provide additional capital to the Corporate Member in order to sustain Syndicate 1492’s strong growth trajectory and increase the share of underwriting profits that are retained within the Probitas group.
The acquisition price is equivalent to c.7x estimated 2026 post-tax IFRS operating profit4 and the transaction is expected to deliver a high-teens internal rate of return (IRR). The estimated impact on the Group’s Solvency II shareholder cover ratio would have been a reduction of c.3 percentage points as at 31 December 20235.
The acquisition is consistent with our capital management framework, which remains unchanged. Aviva continues to anticipate further regular and sustainable capital returns in the future.
The transaction is subject to customary closing conditions including regulatory approvals and is expected to close in mid-2024.
Jason Storah, Chief Executive Officer of Aviva UK & Ireland General Insurance, said:
“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, said:
“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”.
1 Acquisition of 100% of Probitas Holdings (Bermuda) Limited, including its subsidiaries (“Probitas”).
2 Total consideration of £242m, as at 31 December 2023.
3 Historical financial metrics as disclosed within Syndicate 1492 audited Annual Reports.
4 Pro-forma basis, assuming 100% capital alignment of Syndicate 1492 from the 2025 Year of Account.
5 Estimated Solvency II shareholder cover ratio impact subject to finalising the acquisition balance sheet and capital treatment.
