RAC has around 2,000 patrols that attend 2.8m breakdowns each year, including overseas breakdowns through its RAC Europe unit.
JP Morgan has been handed the task of selling the car breakdown specialist although any deal is unlikely to see Aviva recoup its original investment. Sources close to the insurer now value the business at between £600m-£700m with Aviva having already disposed of parts of RAC, such as the BSM driver training school and Auto Windscreens.
RAC, which can trace its roots back to 1897, first introduced uniformed patrols to the UK in 1901. The company now has around 2,000 patrols that attend 2.8m breakdowns each year, including overseas breakdowns through its RAC Europe unit.
Back in 2005, Aviva claimed the acquisition of the company would create cross selling opportunities and lead to higher customer retention – the “holy grail for insurers”. Despite this, the unit has not performed as strongly as hoped and is now viewed as a non-core asset.
The potential disposal will not come as a surprise to most industry insiders with Andrew Moss, Aviva’s chief executive, having warned he will target under-performing businesses across the group this year in a bid to slim down its global operations.
Last week, industry trade magazine Insurance Times revealed Aviva had turned RAC into a standalone business with a new management team in preparation for a sale. Potential bidders for the unit are likely to include private equity firms, which
have been circling UK insurance assets in recent months.
Aviva declined to comment although sources said the sale process was still at “a very early stage”.
News of a potential disposal came as Aviva published its 2010 annual report. This revealed that the company’s directors were handed a combined remuneration package of £7.75m last year – with Mr Moss receiving £2.49m, up marginally from the £2.47m he received in 2009.
Aviva shares, which have risen by almost 10pc this year, closed down 1.1 at 431.6p on Thursday.
Earlier this month, the group impressed analysts and investors by unveiling a 35pc jump in pre-tax profits to £2.44bn in 2010. At the time, Mr Moss insisted Aviva had “outperformed” the market in a “tough external environment”.
The company has also unveiled plans to cut its hybrid debt by £700m over the next three years and has eradicated its pension deficit, which stood at £1.7bn at the end of 2009.
Source : The Telegraph
