Is Esure enough for Ageas?

So Ageas has got the deal done.

After months of speculation, with it being repeatedly named as the most likely candidate from the off, Ageas has bought Esure from owner Bain for £1.295bn.

First thing to say is, how did Esure manage to get a valuation as low as that?

Analysts KBW stated the cash consideration represents 1.3 times Esure’s insurance revenues and “quite a sizable 22x multiple on full year 2024 net earnings”.

Without a smart integration plan, a good understanding of their customers and clear value proposition, Ageas risks losing the very customers it just paid top dollar to acquire.

But still, just shy of £1.3bn for one of the most well-known insurance brands in the UK from the past 20-odd years still feels a low price to pay, especially if you take into account Bain’s advisers were said to be letting the market engage in a bidding war for the provider.

To put that figure into perspective, insurtech Marshmallow recently raised another $90m (£68m) to achieve a $2bn (£1.5bn) valuation.

Marshmallow, which has only just started to be profitable, with less than half the amount of in-force policies, is valued at more than Ageas paid for Esure.

Could Bain have got more?

Bain could maybe feel hard done by in terms of the deal.

Back in 2018 when Bain bought Esure, it paid £1.2bn, then of course over the last few years it has invested £200m into Esure’s huge technology transformation. So just taking those numbers into consideration, Bain is already £100m down on the deal.

Sources told Post Ageas wanted to enter exclusive talks with Bain early on in the process, but that didn’t happen on the advice of Bain’s advisers.

At the time, it was thought there were many potential suitors for Esure, with Allianz, Aviva, maybe even Markerstudy, Axa and others looking to potentially make an offer.

When Esure was first rumoured to be up for sale, one source told Post: “No personal lines player will walk past Esure without taking a look.”

If all of those big names were to engage in the bidding war, then maybe we would be seeing a much higher selling price for Esure. But as time went by, one by one, more providers were taking themselves out of the running.

Axa was always an outside bet anyway, and Markerstudy CEO Kevin Spencer had told Post that the firm had been told by the regulator it had to embed Atlanta before making any more acquisitions.

Sources have told Post that Aviva was maybe a preferred destination from within Esure, and one reason it went to market was in the hope the nation’s biggest insurer would make a bid.

But as everyone knows, Aviva took itself out of contention in December when it secured Direct Line Group for £3.7bn.

So that just left Allianz and Ageas, which had made two bids for Direct Line at the start of the year only to be thwarted.

As economic professors will tell you, if the demand is low, the price offered will be low too. Aviva could have done Ageas a huge favour by taking itself out of the running for Esure.

Maybe if Bain had entered exclusive talks early on, it would have been able to secure a better offer, but hindsight is a wonderful thing.

Ageas’s to lose

Ageas was always the most likely destination for Esure, due to the similarities between the two providers, most notably, the technology provider of both firms, EIS.

It appeared that, given the ambitions shown with Ageas’s actions and words, Esure was a deal that it could not have missed out on.

Speaking to Post last year, Ageas UK CEO Ant Middle said the firm has the ambition to “be among the very best in terms of personal lines insurers in the UK and to continue to grow”.

Of course around that time Ageas’s actions spoke much louder, putting in a surprise bid for Direct Line of £3.1bn.

Realistically, with Ageas’s ambitions to be a top personal lines player, and its ability to throw £3bn plus at a deal, could it really afford to miss out on Esure?

If it had lost out on this deal, there would be serious questions raised about its ability to achieve these goals.

With Esure secured, Middle claimed the combined business will be the number three personal lines provider in the UK market.

Given the growth of others such as Admiral and Hastings, plus the deals coming through still such as Aviva and DLG plus Markerstudy andAtlanta, as well as Allianz, which is dropping the LV brand next year, who knows where Ageas will stand of the podium when the dust has settled?

Dean Standing, chief revenue officer at consultancy Sagacity, observed that while Ageas’s acquisition of Esure is all about customer growth, integration won’t necessarily be easy.

He said: “As a digital-first insurer, you assume Esure has clean and accurate data but stitching that together with Ageas’s won’t be easy. 

“Differences in data structures, processes and compliance can quickly create headaches. Esure’s customers will want clarity on how it will affect them, their policies, their cover and their data. Clear and timely communication are a must.

“Without a smart integration plan, a good understanding of their customers and clear value proposition, Ageas risks losing the very customers it just paid top dollar to acquire.”

With that in mind, can Middle be confident that Ageas will become a “top three player” by the acquisition of Esure and Saga alone? With the ever changing market, can he be sure that Ageas will hold onto a podium position if focusses on organic growth rather than snapping up more insurers?

With others showing obvious ambition to increase market share, no one can stand still in today’s general insurance marker.

Markerstudy CEO Kevin Spencer said he wants his business to be number one, Aviva is looking to increase numbers, Admiral grew customer count in 2024 by 19%, Allianz is pushing with its marketing campaign to increase customer awareness once the LV brand disappears.

Can any of these firms just go the organic route in the coming months and years if they want to be number one, or even top three?

There are a few names that could be up for sale soon, some big names. Could we see more multi-billion pound deals before the end of 2025?

Could Ageas be up to the challenge? We know it has the money to.