Expect to pay £8bn for Aviva’s general arm, UBS warns RSA

RSA Insurance would have to crank up its offer for Aviva’s general insurance business by nearly two thirds to win the backing of the larger company’s shareholders, a UBS analyst said yesterday.

UBS put the highest valuation yet on Aviva’s casualty and property operations in the UK, Ireland and Canada, suggesting RSA would have to pay in excess of £8bn to make the break-up worthwhile for investors. The estimate tops Merrill Lynch’s valuation of £5.8bn by 38 per cent and RSA’s existing approach of £5bn by 60 per cent.

In a note, a member of UBS’ specialist sales team said: “Aviva is [dependent] on its general insurance business for cashflow and profits… the deal is unlikely to happen.”

The comments come as Aviva and RSA fight to influence a key group of overlapping shareholders.

BlackRock, Legal & General and Scottish Widows Investment Partnership are among the asset managers who own significant chunks of both FTSE 100 companies. Aviva boss Andy Moss is urging crucial investors to consider the virtues of combining life and non-life units. RSA chief Andy Haste is trying to stir up discontent by highlighting Aviva’s weak share price performance.