CGU and Norwich Union in £20bn merger
by Anthony Manduca
CGU and Norwich Union have announced that they are merging to create Britain's largest insurance group and the fourth largest in Europe, valued at more than £20bn
It is not clear whether merger is expected to have any immediate repercussions in Malta, where a number of mergers have already taken place as a result of international mergers. CGU, which was set up two years ago as a result of a merger between Commercial Union and General Accident, is represented in Malta by Gasan Mamo Insurance, which itself was established through a merger between Gasan Insurance and Galdes and Mamo.
Gasan Insurance used to represent General Accident while Commercial Union used to be represented by R. Von Brockdorff Insurance. However the latter insurance agency merged with Formosa and Camilleri and Arva Insurance to form Atlas Insurance, which today represents Axa Insurance. Arva Insurance used to represent Norwich Union which is today represented Fogg Insurance.
A spokesman for Fogg Insurance preferred not to comment on the
possible repercussions of the CGU Norwich Union merger on the local market, while nobody was in a position to comment on behalf of Gasan Mamo Insurance.
The international merger will create an insurance giant, with a premium income of more than £25bn a year, 70,000 employees and more than 25 million customers worldwide. The combined group will also be larger than Prudential which has been Britain's leading insurer for almost a century. The new group is expected to sell more than 12 per cent of all life and general insurance policies in Britain.
The deal will be an all share, nil premium merger that will leave CGU shareholders with a small majority stake in the enlarged group.
The group will be run by Bob Scott, chief executive of CGU, who masterminded the merger of Commercial Union and General Accident. Richard Harvey, Norwich Union's chief executive, will become deputy chief executive, and is expected to take charge of the business in a year's time when Scott retires. The chairman will be Pehr Gyllenhammar, CGU's chairman, while George Paul, Norwich Union's chairman, has accepted the role of deputy chairman.
As part of the merger the two companies will pledge to drive through a cost-cutting programme to save up to £200m a year within three years. The enlarged group is expected to shed 4,000 jobs, although Scott will pledge not to reduce the group's employee numbers in Scotland. Many of the job losses will fall in Norwich, where Norwich Union is the largest employer. The new group is expected to locate its headquarters in London.
CGU has been advised throughout by Goldman Sachs while Norwich Union retained Dresdner Kleinwort Benson as its adviser. Goldman has also been hired by CGU to find a buyer for its US operations.
The two groups said they agreed to the merger to create an insurance business with the financial muscle to expand into continental Europe. CGU is already the most European-focused of Britain's financial services groups, with major businesses in France and Holland. Until now Norwich Union's international presence has been minimal.
The group will be the fourth largest insurer in Europe, behind Axa of France, Allianz of Germany and Generali of Italy. It will have more than £200bn in funds under management.
The deal comes less than two years after the merger of Commercial Union and General Accident to create CGU. That union is estimated to have generated up to £300m in cost savings and has been seen by analysts as the role model for an insurance merger.
It will also end the long-running speculation about Norwich Union's future. The company, which demutualised and floated in 1997, has been seen by City investors as too small to survive as an independent business.
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