CMA and market share claims made after DLG accepts Aviva takeover proposal

A takeover deal between Aviva and Direct Line Group (DLG) is going to cause concerns about market share, according to Mark Andrews, insurance director at Altus Consulting.

Today (6 December 2024), it was announced that Aviva had submitted a new takeover proposal to DLG, which has been valued at £3.6bn.

While DLG rejected its rival insurer’s original £3.3bn bid, the two firms have now reached a preliminary agreement on the financial terms for a potential acquisition.

Andrews said the move is likely to result in industry concerns about market share, especially within the motor sector.

And should a firm offer from Aviva be accepted, he felt the Competition and Markets Authority (CMA) would “look closely” at the deal.

He explained: “There will be concerns over the fact that the new DLG/Aviva proposed entity would have a potentially dominant market share of 20% in the motor insurance sector, which is twice that of the nearest competitor.

“We expect the CMA will look closely at this.”

Social media reaction

The DLG board said that it had “carefully considered the proposal” from Aviva and it was minded to recommend to shareholders that they accept a formal offer.

The board also felt the combination of the two firms “would provide the opportunity to deliver significant synergies, creating substantial additional value for both sets of shareholders”.

The announcement of the preliminary agreement was also met with a positive reaction on social media.

Reacting to the news, Jawad Mahmood, chief internal auditor at Small World Financial Services, said: “That’s great news and long time coming.

“DLG really struggled for direction recently. I think it’s good news for the market as it will hopefully bring in synergies, reduce costs and therefore premiums and increase profitability.”

David Brown, director and insurance consultant at David Brown Consulting, also spoke about the positives in the deal, but additionally echoed the CMA point made by Andrews.

He said: “This was inevitable I think and I have no doubt that DLG will find good synergies with Aviva in better propositions, supported by better analytics.

“Customers will benefit (and not just from cost reduction) – as long as the CMA does not feel there is too much power in the hands of too few as the personal lines market moves to an oligopoly.”