UK’s Aviva to Sell French Business for $3.9 Billion, Continuing Core-Market Strategy

Aviva Plc agreed to sell its French business for 3.2 billion euros ($3.9 billion), the largest deal so far in Chief Executive Officer Amanda Blanc’s push to streamline the UK insurer.

The unit was sold to French mutual insurer Aema Groupe, which was recently created by the merger of Aesio and Macif, according to a statement from Aviva Tuesday. The cash sale is a key deal among about 6 billion euros of divestments that Aviva has been pursuing.

“The sale of Aviva France is a very significant milestone in the delivery of our strategy,” Blanc said in the statement. “The transaction will increase Aviva’s financial strength, remove significant volatility and bring real focus to the group.”

Blanc, who took the helm in July last year, has wasted no time in her overhaul of Aviva, whose share price hasn’t grown over the past five years. She said in August that the insurer would focus on its strongest businesses in the UK, Ireland and Canada, and a flurry of deals followed, including the sale of Aviva’s majority stake in its Singapore business for about $2 billion.

Aviva’s shares rose as much as 2.1% in early trading in London.

The insurance industry had been under pressure for years even before the pandemic, with record low bond yields and rising regulation costs eating away at earnings. That helped push deals announced across the industry last year to nearly $100 billion, with many insurers including Aviva building on strength in markets where they’re already firmly established, and shedding less profitable units elsewhere.

Deal Flurry

The insurer’s French operation accounted for about 20% of the company’s revenue in 2019, data compiled by Bloomberg show. Yet it ranks just 11th in the French life-insurance market, which is dominated by mutuals and banks, and 12th in general insurance, according to the company’s 2019 annual report.

Other recent deals include Aviva’s agreement to sell its life-insurance business in Vietnam and the offloading of its stake in an Italian life-insurance joint venture with UBI Banca. The firm is also in negotiations to sell its Italian life insurance business to Paris-based CNP Assurances, Bloomberg News reported earlier this month, citing people familiar with the discussions. Allianz SE is in talks to acquire Aviva’s general insurance unit in the country, the people said.

In the French deal, Aviva also agreed to an indemnity agreement to cover an unusual policy type issued more than two decades ago that enabled French policyholders to switch between funds using week-old prices, and so book a quick profit. The potential liabilities on the so-called “known price” contracts, as well as ongoing litigation between Aviva and some of its clients, had raised concerns among some potential buyers.

The indemnity agreement will have a “negligible” impact on Aviva’s solvency position, the company said Tuesday.

–With assistance from Lucca de Paoli.

Photograph: Aviva’s headquarters in London. Photo credit: Matthew Lloyd/Bloomberg