Deal on the cards despite UK insurance arm’s £24.2m operating loss
French insurer MMA is in pole position to snap up motor insurer Provident in a £70m deal, Insurance Times understands.
The deal is on the cards despite MMA's UK business posting an operating loss of £24.2m last year, partly because of deterioration in the private motor market, it emerged this week.
The French parent, MMA IARD Assurances Mutuelles, is believed to have recently agreed a three-month exclusivity period with Provident’s US owner GMAC and corporate adviser Goldman Sachs.
If successful, it is likely to complete the deal through its UK holding company, MMA Holdings (UK), which incorporates MMA Insurance, high-street broker Swinton and Gibraltar-based motor insurer Gateway Insurance.
However, it is unclear whether MMA would keep Halifax-based Provident – which has been on the market since February – as a standalone business or merge it with its existing UK operation. Both GMAC and MMA declined to comment.
The late move by MMA all but ends the hopes of other interested parties, such as a consortium of private investors fronted by former IAG UK chief executive Neil Utley. Sources close to Utley confirmed that the consortium was no longer in the running.
Markerstudy has also been keeping a close eye on the situation, and a management buy-out has been touted.
Meanwhile, it has emerged that MMA Holdings (UK) gave broker-only insurer MMA Insurance a £10m capital injection in April this year.
MMA said the funding – revealed in its holding company’s full-year results for 2009 – is intended to “ensure that MMA Insurance trades from a position of strength and has a strong capital base to grow the business going forward”.
The Reading-based insurer’s operating loss of £24.2m contrasted with a £300,000 profit in 2008. As well as the poor-performing motor book, it suffered fire and weather losses on its household book. Gross written premium fell 9% to £227.1m.
However, MMA Holdings (UK), boosted by £32m profits from Swinton, recorded an overall profit after tax of £8.3m last year.
The accounts also revealed that Gateway Insurance ceased writing new business last year and posted a 63% fall in net written premium to £13.7m.
Last week, MMA Insurance also announced the appointment of Colin Batabyal – who has worked for both Direct Line and Esure – as its new underwriting director.