What Prompted Aviva To Sell Aviva France To Macif's Aéma Groupe

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Summary

  • The London-headquartered Aviva PLC approves the sale of its French business for €2 billion.
  • The transaction is said to be closed by the end of 2021.

Aviva PLC (LON: AV.) on 23 February, revealed that it has agreed to sell its French operations to Macif’s Aéma Groupe for a financial consideration of €3.2 billion ($3.89 billion). The move comes after the British insurance company announced its strategy to shift the focus of its core operations in Britain, Canada, and Ireland.

The transaction, which is estimated to be completed by the end of this year, covers life and general insurance, asset management business and 75 per cent shareholding in UFF5. The proceeds generated from the disposal of Aviva’s French business will be used to invest for long-term growth, return excess capital to shareholders and support debt reduction.

Aéma Groupe is a France-based insurance company that was formed recently in January this year after French mutual insurer Macif Group and Aésio Mutuelle merged. It caters to around 8 million customers and has a turnover of €8 billion.

Aviva has stated that the sale to Macif’s Aéma Groupe would increase the Solvency II capital surplus and cover ratio by approximately £0.8 billion and 22 percentage points, respectively. The deal is also projected to increase the excess capital by roughly £2.1 billion ($2.95 billion) and centre cash of around 2.8 billion pounds and would reduce the IFRS net asset value by roughly £0.5 billion.

Aviva has agreed to customary warranties and indemnities, including a specific indemnity agreement as part of the transaction with Aéma Groupe, which would result in sharing of the risk in the unlikely scenarios of certain costs in addition to the already appropriate existing provisions of Aviva France's.

Amanda Blanc, Chief Executive Officer at Aviva, termed the transaction a significant milestone and said that it is an excellent outcome for customers, distributors, employees and shareholders, and the transaction will result in an increase of the financial strength of Aviva, bringing real focus to the Group and removing significant volatility.

Aviva France

Established in 2002, Aviva France is the largest part of the British multinational insurer’s manage-for-value portfolio, whose core business is capital intensive. Having 3 million customers, the company has a revenue of €7.8 billion.

Financial Highlights

Aviva France generated the IFRS profit after tax of £293 million in FY 2019. The company’s gross assets amounted to £91.2 billion, the IFRS net asset value worth £2.4 billion and the asset under management was recorded to be £105 billion as on 30 June 2020.

Other Plans of Aviva

The London-based insurer had stated in the previous year that it has been seeking to sell its continental European and Asian businesses.

The company had also entered into an agreement to sell off its Italian business recently to UBI Banca for €400 million on 24 November 2020.

Related Read: Aviva (LON: AV) to offload its Italian arm

Stock Performance

The shares of Aviva PLC initially opened higher by around 2 per cent in London. However, at the end of the trading session on 23 February, the share prices were marginally in red at GBX 374.70.

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