Aviva takeover of AIG Life UK investigation
In September 2023, Aviva PLC. announced that it would be acquiring AIG Life UK for just under £500 million in 2024. The takeover of AIG Life would include 1.3 million individual life insurance customers and 1.4 million group or corporate life insurance policies.
There have been major concerns from many industry experts and financial services professionals, that this would lead to a significant loss of choice and competition for British households. By combining these two life insurance giants, there would be fewer options for consumers wanting to buy life insurance to protect their families.
Our team of financial experts posted about the takeover on the 25th of September, where we expressed our own concerns about the deal. In this latest article, we look at a new investigation of the Aviva deal to be carried out by The UK Competition and Markets Authority (CMA).
60-Second Summary – Aviva and AIG Life £460 million deal to be investigated by the CMA
Whenever a major deal of this kind happens, it is a standard part of the process for there to be some questions and often investigations in to the impact on the wider industry. In this case, the watchdog (CMA) has launched an internal investigation in to the deal, questioning whether it causes ‘substantial lessening to competition’..
- AIG (American Insurance Group) was one of the top 5 life insurance providers in the UK prior to the announcement of the proposed acquisition by Aviva PLC.
- Aviva PLC. is already considered to by the number one life insurance and general insurance provider with a significant market share in the UK.
- Life insurance in the UK has seen several major departures of well-known brands in recent years, including Aegon, Canada Life, Friends Life and Old Mutual Wealth.
- Consumers have been left with questions over existing policies and a significant loss of options when applying for new life insurance policies.
What is the Aviva and AIG investigation for?
This investigation by The UK Competition and Markets Authority (CMA) was launched in February 2024 to provide clarity about whether the deal would ‘reduce competition within the UK markets for goods or services’.
A deal of this magnitude in the UK life insurance industry could see a significant impact on consumers looking for life insurance or other protection products for their families. The departure of a major brand within any sector or industry automatically causes questions about how that might impact consumer choice and competition.
AIG Life UK operates as a subsidiary of American International Group as AIG’s UK protection business. AIG Life is currently regarded as one of the cheapest and most competitive life insurance brands in the UK.
By Aviva acquiring a competitor, this automatically reduces the need for competitive pricing and innovation of new products.
How does the Aviva and AIG takeover affect consumers?
A consumer looking for life insurance will naturally want to compare prices and products from several if not all of the top insurance providers. The acquisition of AIG Life by Aviva, could mean:
- Less competition for lowest premiums
- Fewer insurance providers to choose from so less choice
- Products being removed from the life insurance market
- Less need for innovation to compete with each other
- Significant increase to market share by Aviva (dominant position)
- Existing policyholders could lose benefits
Naturally, any takeover of this magnitude would cause major questions among industry experts and governing bodies about how this might impact consumers. Unless there are clear plans and strategies in place to mitigate these risks, then the watchdog may rule against the merger.
What has Aviva said about the AIG Life acquisition?
It was noted in several life insurance industry publications that an Aviva spokesperson commented “It’s typical for transactions (such as these) to require regulatory approval and this deal is no different. We continue to expect the transaction to complete in the first half of 2024 subject to regulatory approvals, and we will provide an update in due course”.
The purpose of the acquisition according to Aviva, was to build on its momentum in the UK life insurance market, complementing its existing “focus on innovative solutions and strong partnership distribution”.
Our own MPO financial experts are seriously questioning Aviva’s agenda through this deal and its impact on consumers. Some of the commentary around the acquisition seems to be very soulless, which is less about consumers and more about market domination.
They mention that the new combined businesses will create a more efficient process for consumers, but whether this is really true remains to be seen. It currently seems that the main focus is on ‘strengthening prospects’ and the potentially significant strategic and financial benefits for Aviva.
When is the investigation going to happen?
The investigation by The UK Competition and Markets Authority (CMA) will be carried out over the next several months. The findings from the initial part of the investigation will be announced on 8th April 2024.
If further questions remain unanswered, then there is likely to be a second phase for this enquiry from April 2024. It is likely that the full investigation will be completed by the middle of 2024, in time for the proposed deadline by Aviva PLC.
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