Facts Versus Sentiment: Deals in the Insurance Sector
Special Issue January 2016
Facts Versus Sentiment: Deals in the Insurance Sector by Mark Wilson
Over my more than a quarter of a century in the insurance sector, I have bought dozens of companies and sold dozens of companies. One lesson I have learned is this: the deals that work are the deals that make strategic and financial sense. Strategy is only a method or way to a financial outcome. Deals must be underpinned by financials or they will and do fail. Take Aviva in 2011—weak on strategy, a weaker balance sheet than our peers and with a predilection for flag planting.
In the last three years we’ve sold businesses where it was right to do so. That might be because they didn’t fit with our strategy or because they were a drain on capital or because they just didn’t work under Solvency II. Back then, we were in 30 markets. Now we’re in 16. We have focused, simplified and strengthened. We think we’ve got it about right. The Group now makes a lot more sense, and certainly the acquisition of Friends Life made compelling financial and strategic sense. Financially, for us, it added cash flow, reduced leverage and created significant expense savings and was earnings accretive. Strategically, the acquisition is also the catalyst for the next stage of Aviva’s transformation strategy. We are using targeted M&As as a necessary tool to restructure and transform the business. We’re not looking at doing anything else big. But we might be interested in them—but only if they add strategic and financial value.
