The UK’s Competition and Markets Authority (CMA) has launched an investigation into Aviva’s £3.7 billion takeover of rival insurer Direct Line. The deal, which was agreed last year, aims to combine the insurance operations of both companies, creating one of the largest car insurers in the country. The CMA’s phase 1 investigation, which began on Wednesday, will evaluate the potential impact of the merger on competition in the sector over the next 40 working days, with a deadline set for July 10.
Aviva, the UK’s largest insurer, has been expanding its business in the UK, Ireland, and Canada, while selling off subsidiaries abroad. Direct Line, which owns brands such as Churchill and Green Flag, offers a range of insurance products, including home, travel, pet, and life insurance. The combined group will have over 20 million customers and will be a major player in the UK insurance market.
As part of the merger, Aviva and Direct Line plan to cut 5-7% of the combined group’s employee base over three years, equivalent to between 1,600 and 2,300 jobs. The companies have stated that the ultimate number of affected roles could be lower due to unfilled vacancies and annual staff turnover. Direct Line had already been undergoing its own turnaround efforts, including axing around 550 jobs in an effort to cut costs.
The takeover is the latest significant deal for Aviva, which previously acquired Friends Life for £5.6 billion in 2014. The company’s chief executive, Amanda Blanc, has been focused on expanding Aviva’s business in key markets while streamlining its operations. The merger with Direct Line is expected to create a major player in the UK insurance market, with a significant presence in the car insurance sector.
The CMA’s investigation will assess whether the merger will lead to a substantial lessening of competition in the market. If the regulator finds that the deal does not pose significant competition concerns, it will give the merger the green light. However, if it raises concerns, the CMA will proceed to a more in-depth phase 2 investigation, which could lead to further scrutiny and potentially even block the deal.