CORRECTED – DEALTALK-RSA’s Aviva bid a sign insurers stay close to home

(Corrects in paragraph 10 to show Resolution results due on
Tuesday, not Wednesday)
(For more Reuters Dealtalks, click on [DEALTALK/])

* Pru flop closes door on transformational insurance deals

* Smaller domestic and regional M&A still eyed

* Regional consolidator Resolution mulling U.S. deals

By Victoria Howley and Myles Neligan

LONDON, Aug 16 (BestGrowthStock) – RSA’s (RSA.L: ) approach for Aviva
(AV.L: ) shows insurers are looking for takeover deals at home
since Prudential’s (PRU.L: ) failed offer for Asia’s AIA tempered
enthusiasm for risky overseas acquisitions.

That botched deal has given pause to any plans that peers
such as Allianz (ALVG.DE: ), Munich Re (MUVGn.DE: ) and Zurich
Financial Services (ZURN.VX: ) might have had to buy their way
into high-growth Asian or eastern European markets.

But domestic and regional deals are still on the agenda, as
companies take advantage of low valuations to plug gaps in their
businesses, bankers and sector specialists say.

National consolidators such as Clive Cowdery’s acquisition
vehicle Resolution (RSL.L: ) are still on the lookout for a steady
flow of smaller deals.

“People saw Prudential flounder very publicly, and it has
made them wary of cross-border, transformational deals, although
in-market consolidation will happen,” a banker advising
insurance companies said.

“Resolution is already doing that in the UK, and Delta Lloyd
(DLL.AS: ) is poised to play a similar role in the Netherlands,”
the banker said, requesting anonymity.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a Breakingviews column on Aviva, click [ID:nLDE67F0G0] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Talk that RSA was eyeing acquisitions had been swirling for
months, and UK insurer Aviva rejected a 5 billion pound approach
that the motor and home insurer had made weeks earlier for a big
chunk of its non-life operations.

Aviva, privately criticised by some of its shareholders for
underperformance, rejected the offer because it was too low, a
banking source told Reuters last week.

But with financing lined up, RSA could return to the
negotiating table to craft a deal that analysts say makes
strategic sense. [ID:nLDE67F07V]

Resolution has set itself the target of building up a life
insurer with an embedded value — a gauge for the worth of a
life insurance portfolio — of 10 billion pounds ($15.59
billion) before selling or floating it in 2013.

Resolution, which reports half-year results on Tuesday,
bought Axa’s UK life business in June, having bought Friends
Provident last year, creating a combined group with about 6
billion pounds of embedded value.

NAME DROPPING

The group has lined up some resounding names to help it
reach its target, with Jacques Agrain, formerly head of
reinsurer Swiss Re (RUKN.VX: ) and Mel Carvill, previously head of
M&A at Italy’s Generali (GASI.MI: ) now on board.

It has also attracted Bill Winters, former co-head of JP
Morgan’s investment bank, to advise on projects that might
include plans to consolidate U.S. life insurers, according to
bankers and analysts. [ID:nLDE6781G2]

“There are fairly big hitters on the board who have got wide
financial services experience. They’ve obviously thought about
and are working hard on some other projects,” said Berenberg
Bank analyst Trevor Moss.

The takeover specialist is targeting annuity and protection
providers such as Legal & General (LGEN.L: ) or Prudential’s UK
arm for its third and probably last British life insurance deal,
which it aims to complete by mid-2011, analysts say.

But it could snap up an asset manager instead, which would
allow it to save on fund management fees. F&C, the money manager
for life insurer Friends Provident, is one likely target,
according to analysts.

Buying a fund manager could also help Resolution get a
higher price when Cowdery sells his creation, as fund managers
are valued more highly than life insurers, currently trading at
a discount to Embedded Value of up to 30 percent.

“If he wants one times Embedded Value for a life insurer,
people will laugh him out the door,” said a second banker.

Analysts and bankers also expect consolidation in the
Netherlands, a country with an M&A-friendly legal framework and
a critical mass of potential disposals following a round of
insurer bailouts during the financial crisis.

Life insurer Delta Lloyd, which gained an acquisition
currency by listing shares in an initial public offer last year,
has expressed an interest in buying unwanted assets.
(Editing by Douwe Miedema and Will Waterman)
($1=.6415 Pound)

CORRECTED – DEALTALK-RSA’s Aviva bid a sign insurers stay close to home