Aviva France sale to Aéma Groupe secures higher price than expected

Aviva confirmed it has sold its french arm to Aéma Groupe for 5.6 percent more than analysts had predicted.

The insurer said the sale of Aviva France to Aéma Groupe for €3.2 billion in cash is part of a strategic transformation to focus on its strongest businesses in the UK, Ireland and Canada. It said the move will “significantly strengthen" Aviva's capital and liquidity with an increase in excess capital of around £2.1 billion and centre cash of around £2.8bn. The move also realises “significant value for shareholders” and “provides security” for employees and continuity of service to customers under new ownership, the company added.

Amanda Blanc, chief executive officer of Aviva, said: “The sale of Aviva France is a very significant milestone in the delivery of our strategy. It is an excellent outcome for shareholders, customers, employees and distributors. The transaction will increase Aviva’s financial strength, remove significant volatility and bring real focus to the Group.

“Aéma Groupe has a strong heritage in the French insurance industry and this transaction will propel it to a top five position in the French market. I am confident Aéma Groupe will be an excellent owner of Aviva France.”

Philip Kett, equity analyst at Jefferies International, said the insurer’s confirmation of the disposal of Aviva France €3.2bn was 5.6 percent more than the €3.03bn his firm had expected.

He said: “In our view, the disposal of Aviva France is the most significant of Aviva's potential disposals, as this business made the group highly exposed to low interest rates and highly correlated to French yields especially. Disposing of Aviva France (and the AFER contract) therefore de-risks Aviva and creates >£2bn of proceeds that can de-lever the rest of the group.”

The analysis from Jeffries added this transaction will generate £2.1bn of excess capital and centre cash of £2.8bn, moving the Solvency II ratio up by around 22pts (surplus up £0.8bn). But it added: “On the other hand, the IFRS net assets will fall by £0.5bn and the deal includes the non-life and asset management business, as well as French life. Aviva's intra-group debt of €1.1bn is included in the consideration.”

Aviva said it expects to use the increased capital and cash to support its capital framework of debt reduction, investment for long-term growth and return of excess capital to shareholders. Part of the cash proceeds (up to £0.5 billion) will be used to accelerate repayment of some of the group’s internal loan with Aviva Insurance Limited.

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