The full acquisition of Tesco Underwriting is expected to help the British retail bank to create an end-to-end insurance business
Tesco Bank to take full ownership of Tesco Underwriting. (Credit: Simon Ryder/Tesco Personal Finance Plc)
Tesco Personal Finance (Tesco Bank) has agreed to acquire Ageas UK’s stake of 50.1% in their joint venture Tesco Underwriting in a deal worth around £125m.
In addition to the consideration, the Ageas subsidiary will receive its part of any change in net asset value realised by the UK-based joint venture from 30 June 2020 until the closing of the deal.
Ageas UK will also get a payment of £21m, which will be a reimbursement of an internal loan.
Founded in 2010, Tesco Underwriting’s main focus is to underwrite Tesco Bank branded car and home insurance policies. Besides, the company offers a claims service to its customers. In 2014, the partnership was given a seven-year extension up to 2021.
Tesco Bank is a retail banking company owned by British retailer Tesco.
Why Tesco Bank is acquiring the remaining stake in Tesco Underwriting
The bank said that the full acquisition of the Tesco Underwriting will help it create an end-to-end insurance business that is placed uniquely to help Tesco shoppers in handling their money in a better manner.
According to Tesco Bank, the full acquisition aligns with its strategy of concentrating on propositions which better meet the requirements of Tesco shoppers.
Furthermore, the bank said that the deal consolidates on the unique offerings, including guaranteed Clubcard discount and others that insurance customers are already benefiting being a part of the larger Tesco family.
Tesco’s brand value and its focus on rewarding loyalty are expected to enable the underwriting business to respond positively to the recent review of general insurance pricing by the UK Financial Conduct Authority (FCA).
Tesco Bank chief executive Gerry Mallon said: “Today’s announcement is a significant step in Tesco Bank’s development which underlines our commitment to the insurance market and our customers.
“We look forward to doing more of what we know our customers want – offering products that have a strong emphasis on value, helpful benefits and rewarding loyalty.”
Tesco Bank plans to fund the acquisition through its cash reserves.
For Ageas, the sale is part of its business strategy to concentrate on developing its core business and broker distribution channel.
Ageas UK CEO Ant Middle said: “The success of Tesco Underwriting over the last ten years is further evidence of our credentials and expertise for building strong partnerships.
“We are justifiably proud of the progress made by this business, led more latterly by Steve Kingshott and his team. Given the direction of both businesses, it’s now the right time for us to hand over to Tesco Bank to take the business forward.”
All the three parties are expected to closely work to facilitate a smooth transition prior to the formal transfer of control, which is likely to take place in Q2 2021.