Royal Bank of Scotland's takeover of Churchill was given a warm reception yesterday by industry experts.
According to the FT.com, James Eden, an analyst at Commerzbank said: "The acquisition is a good fit with Royal Bank's Direct Line general insurance business.
"Churchill's strength in home insurance will complement Direct Line's dominant position in motor insurance. Churchill also brings a strong presence in commercial products for small and medium businesses."
Churchill's combined operating ratio - a measure of its underwriting performance - improved to 99.5% last year, making it one of the few insurers to make a profit from its underwriting.
According to reports, analysts claim its combination with Direct Line's ratio of 89.4% means it will generate good underwriting profits.
Citigroup Smith Barney claimed Churchill's deal was, "a classic in-house deal in general insurance, from which we would expect decent cost savings".
BNP Paribas analysts said the deal would generate significant cost-saving opportunities.
A BNP Paribas analyst said: "If 40% of Churchill's administrative expenses can be eliminated, then its profits would increase from £86m to £180m and the acquisition multiple would fall to 8.7.
"Churchill differs from Direct Line in having broker distribution as well as direct sales but it has similar claims experience, suggesting that there is no quality issue involved."
