Citi analysts put Aviva's net profit at up to £200m less than RSA's estimate

RSA’s £5bn bid for Aviva’s general insurance business may not be as low as some have assumed, according to investment bank Citi.

RSA estimated that the target businesses within Aviva – which exclude RAC – had net income of around £510m in 2009. As such, it said its offer represented 9.8 times earnings. The £510m is based on an operating profit of £713m, derived from Aviva’s results and an assumed tax rate of 28%. But Citi’s analysis puts the net profit figure at £300m-£400m, in part because the £713m includes some of RAC’s operating profit. This would result in a much higher price-to-earnings multiple.

Citi analyst James Quin said: “This means that the optimistic bull case for Aviva of the £5bn being an under-priced opening gambit looks to us to be wide of the mark.”