Oxbow Partners warns of further consolidation after Aviva and Ageas deals

Oxbow Partners has said there is likely to be further consolidation in the personal lines market following major deals being announced.

In the past year, Aviva and Ageas agreed deals to takeover Direct Line Group (DLG) and Esure respectively, with both transactions set to create major forces in the personal lines market.

In its newly published report, entitled Profitability In The UK Motor Market, Oxbow Partners said these deals “have the potential to change the shape of the market as a whole”.

And the consultancy continued that it “will be interesting to see how the rest of the market reacts”.

It added: “We believe that there will be further consolidation in the UK personal lines market and chief executives need to consider their M&A strategy, either defensive or offensive.”

Pricing reform

Oxbow Partners felt that the FCA’s general insurance pricing reform would be a key reason for there being more consolidation.

Introduced in January 2022, the reform aims to protect consumers by abolishing price walking, preventing insurers from offering cheaper policies to new customers while increasing prices for existing policyholders.

Oxbow Partners said that it is now harder for insurers to grow organically and that cutting prices “will still get you more market share, but it costs a lot more than it used to”.

However, consolidation could help with cost savings – Oxbow Partners said that Aviva believe a further £125m of shared costs can be stripped out over the next three years, while Ageas also expects to generate £130m of annual cost efficiencies once Esure has been fully integrated in 2028.

In turn, it felt insurers could follow Aviva and Ageas’ lead on inorganic growth, with the consultancy saying: “Growth through M&A is a more appealing option than it has been in the past.

”Increased concentration of the market into fewer, larger players should, in theory, bring more rationality to pricing and a focus on the technical price as the core driver.”