Aviva linked to £3bn Santander deal

Norwich Union's parent company Aviva is being linked to a £3.2bn deal to buy the insurance arm of the Spanish banking giant Santander.

The Spanish group is said to be looking to sell its Santander Seguros insurance business after announcing earlier this month that it plans to buy UK mortgage lender Alliance & Leicester for £1.3bn.

Santander's insurance business has 16 million policyholders worldwide and generates about £3bn in premiums.

Life insurance accounts for about 67pc of the business - with only 16pc of policies relating to property cover, accident or car insurance.

It is Spain's second largest insurer and operates across Europe and Latin America.

The Spanish press reported that Santander was offering the use of its 13,500 bank branches across the world as a sweetener for any buyer of the insurance business.

Last night Aviva declined to comment on "market rumour and speculation".

Aviva is due to publish its interim financial results next week.

Santander also declined to comment.

But the Spanish newspaper Cinco Dias reported that talks were already under way with Aviva and its rivals, French insurer Axa and the German group Allianz.

Santander bought the UK high street bank Abbey for £8.5bn in 2004. If the deal to buy the Alliance and Leicester goes through, the group will become Britain's second-biggest mortgage lender.

There were also reports last week that Santander was looking to sell its asset management business for about £2.3bn.

Meanwhile, broker Panmure Gordon has reduced its estimates and target share price for Aviva ahead of next week's results and amid concerns about “slow new business sales and lower returns from existing business”.

Panmure Gordon added that it expected Aviva to declare half year pre-tax profits of £1.6bn.

The broker has lowered its 12-month share target price for Aviva from 854p to 803p."

Courtesy of EDP

23 July 2008