Aviva happy after acquisition of RAC |
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Published
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Thu, 10 Mar 2005 01:00
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Aviva, UK’s renowned insurance company announced its takeover of the distinguished motor group, RAC, in view of well designed strategies to cut costs and escalate profits. Aviva hopes to slash costs by a good £80m a year by the year 2006.
Moreover, the communion of the two businesses is also being looked at as an opportunity to expand the Norwich Union Insurance Business by offering valuable insurance services packaged with efficient motoring services for customers.
| The potential of such a combination of services to boost revenue is huge and Aviva is making no bones about that. RAC boasts of a powerful background with its roadside recovery service, BSM driving schools plus insurance and legal services; all of which constitute about 54% of its profits.
Its roadside assistance customers amount to an impressive 6.7 million besides its 275,000 motor and home policyholders. Lex vehicle leasing which took over RAC for £437m, way back in 1999 is also part of its business services unit.
Aviva, being the world's fifth-largest insurer has its Norwich Union business having a 14% share grip over the UK general insurance market and recorded a surprising 24% rise in worldwide operating profits in 2004. It is also one of the first insurers to state operating profits under the new European standard way of financial reporting called the "embedded value" system wherein insurer’s profits and financial standings are made quite apparent.
However, the downside of this deal may include the fact that about 1,700 job losses will occur to both businesses with Aviva reducing about 900 jobs at the head office and shifting around 800 administration and processing jobs outside the UK. India or Sri Lanka where Norwich has four operations might be the possible new destinations of these transferred jobs.
On the whole, Aviva seems to be taking the uphill climb for a long time to come with RAC’s possession. Possibilities of it even selling RAC’s motoring support services arise once the takeover consummates.
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