Provident move for General Accident

NIC CICUTTI

General Accident, the Scottish insurer, yesterday announced a pounds 170m takeover of Provident Mutual, in a deal seen by experts as an indicator of future rationalisation within the life insurance industry.

The company said pounds 25m of the amount paid would be used to pay special bonuses to Provident Mutual with-profits policyholders, whose vote in favour is needed for the takeover to happen. To further sweeten the deal, GA will index-link all fund management charges to their 1994 levels for 10 years. Savers with unit-linked policies, which are more closely tied to stock market performance, are also being told that discretionary charges will not go up for five years.

GA plans to pay for its acquisition by means of a pounds 135m rights issue, in which it aims to place more than 22 million shares with institutional investors at 600p a share. Major redundancies are likely at Provident's Stevenage headquarters, where 700 people work. Cuts are also expected among the firm's 400-strong salesforce and support staff, plus its London office.

Were the takeover not to be approved, all Provident Mutual policyholders would face higher charges because of the company's need to restructure itself, GA claimed.

Brian Richardson, chief executive of Provident Mutual, who will become deputy general manager of GA Life, said: "For some time we have been considering [our] strategic direction. General Accident has the resources to promote and develop Provident Mutual as part of its life and pensions operation."

Provident Mutual's takeover follows a growing trend towards rationalisation within the industry because of rising competition and falling sales.