The State's largest motor insurer, Guardian PMPA, may soon have a new owner following confirmation from its UK parent, Guardian Royal Exchange, that it is considering options that may lead to an offer for the company.
Guardian insures about 40 per cent of the Irish private motor market with some 250,000 private drivers and commercial vehicles on its books. It also provides general insurance products and has a life assurance operation and a re-insurance company based at Dublin's International Financial Services Centre.
Its Irish operations are now profitable. Its half-year profits rose by 83 per cent to £68 million at the end of June. The surge in profits was on the back of a sharp reduction in losses at the general insurance operation and substantial investment gains.
Analysts believe GRE may be split up with companies such as the French group, Axa, which has a controlling interest in the UK life assurance company Sun Life & Provincial believed to be prospective purchasers of all or part of the group. GRE's general insurance arms could attract interest from Germany's Allianz group or the US-owned AIG. Another interested party could also be the French insurer AGF. Neither AXA nor Allianz have any subsidiaries in the Irish market currently.
AIG operates mostly small commercial lines in Ireland, mainly through brokers. While AGF has a strategic interest in Irish Life. GRE is likely to carry a price tag of around £3 billion sterling.
Following weekend speculation, GRE confirmed yesterday that it is considering a number of options which may lead to an offer for the company and has appointed the US investment bank, Morgan Stanley Dean Witter, to handle the sale. The move follows an approach from another institution. In a statement the insurer said against a background of ongoing consolidation in the financial services sector, both in the UK and overseas, the company is continuously monitoring events.
GRE's shares gained ground in London yesterday on the back of a possibly takeover, rising 421/2p to £3.50 sterling. GRE grew out of the Royal Exchange Assurance which was established in 1720. The current company was a result of a merger in 1968 with Guardian Assurance. The insurer has been dwarfed in recent years by the merger between Royal Insurance and Sun Alliance, which created Royal & Sun Alliance, and the deal between Commercial Union and General Accident to form CGU.
Analysts have suggested that GRE, which is the smallest of the UK composite insurers, lacks critical mass in its markets and the group's long history has left it spread across a range of countries and niches.
The wave of consolidation in the banking and insurance sector will have a major impact on the Irish market. Irish Life and Irish Permanent are expected to agree a merger within the next couple of weeks, while CGU, which has a 28 per cent stake in Hibernian, could mount a takeover bid for that company.
