Aviva swallows Ireland's Friends First in EUR 130m deal

Aviva has reached an agreement to acquire Irish insurer Friends First Life Assurance Company for a cash consideration of €130m, it announced on Tuesday.

The FTSE 100 company said that as a result, it would become one of the largest composite insurers in Ireland, with its market share in life insurance increasing to 15% alongside its existing leading 15% market share in general insurance.

It said the transaction was in line with Aviva's strategy to allocate capital in selected markets where it has scale or competitive advantage, and where it can further expand its range of products across life and general insurance.

The consideration represented a multiple of 0.8x Friends First's adjusted net asset value, Aviva’s board pointed out.

It said it expected the transaction to meet the group's operating return on capital hurdle from year one, and to “significantly exceed” the hurdle thereafter.

“The Irish economy has experienced a robust recovery in recent years and the prospects for continued growth remain strong,” Aviva’s board claimed in its statement.

“The life insurance market in Ireland has grown by around 9% since 2014.

“Aviva Ireland has demonstrated consistent growth over the past few years, with an operating profit growth at HY 2017 of 12%.”

Friends First, currently owned by Dutch insurer Achmea Holding, has been operating in Ireland for more than 180 years with a focus on life protection, pension and investment products for individuals and companies.

It has more than 250,000 customers, a market share of 6% and was described by Aviva as a “market leader” in group risk and income protection.

The transaction remained subject to regulatory approval, and was expected to complete in the first quarter of 2018.

“Friends First is a natural fit for Aviva Ireland,” said CEO of Aviva International Insurance, Maurice Tulloch.

“The acquisition will enhance Aviva Ireland's product offering and accelerate our international growth agenda. It makes sense financially, strategically and for our customers.”

Tulloch said Aviva;s Irish business had been among the “best performers” in the group over the last couple of years.

“This acquisition underlines Aviva's disciplined approach to deploying capital into bolt-on acquisitions that meet our strict financial criteria and strengthen our businesses.”

John Quinlan, the CEO of Aviva Ireland, said he was looking forward to welcoming Friends First employees to the Aviva group.

“Friends First is an excellent business and will be a great addition to Aviva Ireland,” Quinlan claimed.

“Their expertise in the area of income protection and group risk, in particular, will complement and strengthen the broad range of insurance products we offer our customers.”

It would also make Aviva Ireland the leading insurer for brokers in the Irish market, Quinlan noted.

“Together, our market leading insurance business will be well placed to take full advantage of Ireland's fast growing economy.”