A deal could value entire LV= GI unit at over £1bn, report suggests

GI unit

Allianz is in talks to buy a minority stake in LV=’s general insurance (GI) business, Sky News has reported.

Talks are at an early stage, Sky News said, and it cited one analyst that suggested a deal could value the entire LV= GI unit at well over £1bn.

This latest report follows a Sky News report in March that said LV= had previously been in discussions with fellow life mutual Royal London about a merger of the whole group, and had received approaches from other insurers about buying the GI business. These discussions did not result in any deals.

LV= is the centre of speculation about possible deals because it is known to be looking for a range of ways to improve its capital position following the introduction of Solvency II and more recently the cut in the Ogden discount rate, which has hit all UK general insurers hard.

LV=’s Solvency II coverage ratio at the end of 2016 was 140%, an improvement over the 126% at the half-year stage but below where the insurer’s board wants it to be. Had LV=’s capital been at the board’s preferred level in 2016, its Solvency II coverage ratio would have been 150%.

The company said in its annual report: “We will pursue a number of options which are intended to bring the group’s capital surplus within risk appetite.”

German insurance powerhouse Allianz is often rumoured to be a buyer because it is financially strong and has money to spend.

At the beginning of this year it was rumoured to be interested in parts of Italian insurer Generali’s business as well as Australian insurance Group QBE.