Aviva buys Bermuda re/insurer Probitas for $306m

UK insurance giant Aviva has bought a Bermuda-registered  specialty re/insurer which paves the way for it to re-enter the Lloyd’s market for the first time in 24 years.  

Aviva said it had bought Probitas Holdings and its subsidiaries for $306 million, including its fully-integrated Lloyd’s platform, encompassing its Corporate Member, managing agent, international distribution entities and tenancy rights to Syndicate 1492. 

Aviva, which initially exited Lloyd’s following the CGU and Norwich Union merger in 2000, said its latest deal “significantly expands” market opportunity for Aviva’s Global Corporate & Specialty (GCS) business. The transaction is in line with Aviva’s strategy of executing bolt-on acquisitions of “capital-light” businesses in its core markets to drive growth.

Amanda Blanc, group chief executive officer of Aviva, said: “This acquisition is another step in our strategy to invest in Aviva’s future profitable growth. Aviva’s presence in the Lloyd’s market opens up new opportunities to accelerate growth in our capital-light General Insurance business.”

Probitas, founded by Ash Bathia in 2013, will continue to operate under its own brand and under the same management team. 

Bathia, chief executive officer of Probitas, said: “As Probitas embarks on the next stage of its evolution, it was important to find a partner with the financial strength and commitment to enable Probitas to optimise its potential and ambition to significantly scale up and diversify the business and take advantage of a unique opportunity to build one of the most successful and profitable franchises in the Lloyd’s market. 

“I am convinced that Aviva is an ideal partner and I am truly excited about being part of the Aviva Group and the opportunities ahead for our business and staff.”

The Lloyd’s market offers Aviva access to significant in-appetite premium volumes, international licences and broader distribution networks. It will also allow Aviva to capitalise on its existing underwriting capabilities, broker relationships and capital base, the company said. 

Syndicate 1492 reported gross written premium (GWP) of £288 million in 2023 and a 21% compound annual growth rate (CAGR) since 2019. During this period, the business has consistently been a top performer within its Lloyd’s peer group, achieving an average combined ratio of 82%.

“Strong growth is expected to continue during 2024, driven by favourable pricing trends, new product lines and expanded local distribution in key markets,” Aviva stated.

“Given Probitas’ focus on specialty lines, the transaction represents a unique opportunity for Aviva to enter the Lloyd’s market via a business that is well-aligned with Aviva’s strategy in terms of product, geography and risk profile,” it added.

Subject to regulatory approval, Aviva intends to provide additional capital to the Corporate Member in order to sustain Syndicate 1492’s strong growth trajectory and increase the share of underwriting profits that are retained within the Probitas group.

The acquisition price is equivalent to about seven times estimated 2026 post-tax IFRS operating profit and the transaction is expected to deliver a high-teens internal rate of return (IRR). The estimated impact on the Group’s Solvency II shareholder cover ratio would have been a reduction of about three percentage points as at 31 December 20235.

The transaction is subject to customary closing conditions including regulatory approvals and is expected to close in mid-2024.

Jason Storah, chief executive officer of Aviva UK & Ireland General Insurance, said: “This is a fantastic opportunity for both Aviva and Probitas. The Probitas track record, technical expertise and high-quality team will be an excellent addition to Aviva. They will continue to run the business post-acquisition and the Probitas brand will remain. 

“We want to preserve their unique, agile culture and support the team to focus on delivering profitable growth that will benefit from leveraging Aviva’s own scale and capabilities.”

Bathia, who has 40 years re/insurance experience and was an active underwriter for Lloyd’s syndicates for QBE, founded Probitas in 2013 with the goal of combining “the prestige and tradition of the Lloyd’s brand with innovation, technology and diversity; bringing together a robust team of experts, all of whom are respected in the industry”. 

Probitas is headquartered in London with hubs in Brussels and Mexico City, It writes insurance in the UK, Europe, the Middle East and Africa, Asia and Australasia and Latin American and Canada. 

As part of the deal, Saudi Re sold its 49.9% stake in Probitas for £120 million ($152 million) in cash.