Aviva Shares Fell, Then Recovered, on the Canadian Acquisition

The Aviva plc (LON: AV) share price fell 2.46%, then quickly recovered its losses after announcing that it had acquired Optiom O2 Holdings Inc from Novacap and other minority shareholders for consideration of c.£100 million (c.CAD$170 million).

The transaction marks Aviva's commitment to expanding its presence in Canada while enhancing its capital-light growth strategy. Optiom, a managing general agent (MGA), is a prominent provider of vehicle replacement insurance services in Canada. 

Optiom is dedicated to offering customers flexible payment options, a key element in its success within the competitive Canadian insurance landscape. The acquisition aligns with Aviva's overarching strategy to strengthen its capital-light businesses, which already comprise more than half its portfolio.

Aviva aims to maximise its operational efficiency and profitability while minimising capital allocation. The Optiom acquisition aligns perfectly with these objectives, positioning Aviva as a dominant player in a profitable segment of the Canadian insurance market.

One of the key advantages of this strategic move is the expanded underwriting capacity it provides to Aviva Canada. As an existing underwriting capacity provider for Optiom, Aviva Canada now has an excellent opportunity to increase its foothold in an attractive line of business.

This move not only reinforces Aviva Canada's presence but also secures a stable and growing stream of distribution income. Aviva Canada will benefit from a diversified revenue stream, mitigating risk in an ever-evolving insurance landscape.

Optiom's existing distribution relationships also play a crucial role in this acquisition's strategic significance. Aviva Canada can leverage these strong distribution ties to reach a broader customer base, expanding its market share.

Customers of Optiom will now have access to Aviva's renowned best-in-class service, enhancing their overall insurance experience. This synergy between Optiom and Aviva Canada ensures that new and existing customers receive top-tier service quality.

Aviva Canada’s CEO Tracy Garrad said: “The acquisition strengthens our offering and distribution capabilities in a highly attractive segment of the Canadian insurance market.  We know Optiom well through our existing relationship and are excited about what we can do together to better serve our brokers and customers.”

Aviva share price. 

Aviva's share price fell 2.46% to trade at 693.0p from Friday’s closing price of 710.5p, then recouped its losses.