Aviva agrees takeover of Friends Life in £5.6bn deal
1st December, 2014
Aviva has made a preliminary deal to purchase rival company Friends Life – a purchase that reflects the changing shape of the British insurance industry since George Osborne unveiled his pension reforms earlier this year. The £5.6bn deal will be the largest in the UK since CGU and Norwich Union merged to create Aviva almost 15 years ago.
Aviva's chief executive, Mark Wilson, has made a bold move considering that he has been in his position for less than two years. Both companies have released statements confirming the negotiations after the deal was first reported by the Financial Times. Friends Life shares have now been valued at 398.9p, an increase of 15% since Friday's closing share price of 347.7p.
Insurance providers have struggled to maintain policy figures since the government's announcement in March that pension savers were to be given greater freedom to draw on their savings pots and avoid buying annuities. Retirees are now encouraged to compare life insurance quotes and seek out cover better suited to their current needs, and are no longer at risk of high tax fees imposed by pensions companies should they wish to cash in monies accrued.
Aviva has fared better than many of its rival insurers since the changes were announced due to the diversity of its products. Friends Life, however, is grappling with the fallout of the pension reforms due to being more UK-focused, with annuities making up a large part of its sales.