Aviva to sell US arm in £1.1bn deal that will lift share price

Aviva: Delta Lloyd sale has raised �353m. Picture: PA
Aviva: Delta Lloyd sale has raised �353m. Picture: PA
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INSURANCE giant Aviva is to quit the US life and pensions market after agreeing a $1.8 billion (£1.1bn) disposal – the biggest so far in a restructuring aimed at boosting its flagging share price.

The group is selling Aviva USA to Athene Holding – a major player in America’s pension annuity sector.

The move comes six years after the British firm entered the US with the acquisition of AmerUs for some £1.6bn, 
although the group stressed it will retain its asset management presence in America.

Yesterday’s sale comes as part of a major overhaul being led by Scots-born chairman John McFarlane following the departure of chief executive Andrew Moss in May amid discontent over a poor share price performance.

New chief executive Mark Wilson, the former boss of Asian insurer AIA, is due to take over the reins on 1 January.

As part of the plans announced in July, McFarlane is working towards the sale or scaling back of 16 underperforming businesses.

The UK’s largest insurer is also cutting up to 800 jobs across the business under plans to slash costs by £400 million.

Aviva has already offloaded its Sri Lankan business, sold down its stake in Dutch insurer Delta Lloyd and earlier this week announced it was netting almost £500m after agreeing a settlement to walk away from its Spanish joint venture with Bankia.

The Norwich-headquartered group, which has sizeable general insurance operations in Scotland, employing about 1,500 in Perth and 1,000 in Bishopbriggs, said the sale of its US business will “considerably” boost its balance sheet strength.

McFarlane told investors: “The sale of Aviva USA is an important step forward in the delivery of our strategic plan. It considerably strengthens Aviva’s financial position, increases group liquidity and improves our economic capital surplus whilst also reducing its volatility.

“The disposal of the US business, combined with the recent settlement with Bankia, represents a successful end to the year and sets us up well for 2013.”

Aviva USA is a provider of indexed life insurance and indexed annuities with more than 930,000 customers. Headquartered in Iowa, the business employs some 1,800 people.

Athene will become America’s second-largest fixed and equity indexed annuities player following the deal.

Aviva USA accounted for about 9 per cent of the UK group’s total operating profit last year. Proceeds from the sale will be $1.55bn once debt is repaid.

Aviva added that the agreement was subject to regulatory approvals and was expected to be completed in the new year.

Shares in Aviva dipped 1.3p to 382.7p valuing the business at £11.3bn.