Industry: City abuzz with gossip about union of UK's two largest insurance firms
Speculation is mounting that the UK's two largest insurance firms, Aviva and Prudential, are in talks about a possible tie-up.
Rumours have been circulating in the City during the last few weeks that the firms may merge.
Investment bank JP Morgan has added fuel to the fire by suggesting a merger could prove a good fit, and that the Competition Commission would be likely to look favourably on it.
Gordon Aitken, a market analyst at JP Morgan, said: "There has been a great deal of speculation that Aviva and Prudential will merge. The new group would be able to fund its strong growth prospects.
"The British Government would like to have a national champion, which to date is absent in the UK compared with other countries. That may see competition issues being waived."
Aitken added that a merger was more feasible because the two firms target separate markets.
He said: "There is little overlap between the two firms. While Aviva is big in Europe, Prudential is big in the US and Asia."
William Baldwin-Charles, head of strategic media relations at Prudential, refused to deny a merger was on the cards.
He said: "We don't comment on market speculation. We hear rumours all the time."
But he insisted Prudential could continue to thrive on its own, saying: "We don't think we need to merge with anyone else."
Aviva also refused to be drawn upon the speculation. However, Hayley Stimpson, director for external affairs at Aviva, added: "We always have plans to grow our business. The message is that we will be looking at profitable growth."
Andy Milburn, IFA market manager at Royal Liver, reflected on the impact a merger would have on the protection market.
He said: "It will be interesting if the merger does go ahead to see which of the two companies' protection products would end up being sold by the merged company.
"Past mergers suggest that one product range falls by the wayside in favour of the other in each product area. They'd probably look at protection as a whole and choose the range rather than doing it by product."
