After months of speculation, London-headquartered insurer Aviva has announced an agreement to sell its French business to mutual insurer Aéma Groupe, for €3.2 billion in cash.
In the second-half of last year, reports started to emerge claiming that Aviva was considering the sale of its life and P&C operations in France as the insurer embarks on a strategic transformation under the leadership of Amanda Blanc.
Back in September, it was revealed that a consortium of Allianz and life re/insurer Athora Holding was considering a takeover of the business.
While talks were said to be at an advanced stage, no deal came to fruition and around a month later, reports emerged that mutual insurer Macif and a consortium consisting of Generali and investment firm CVC Capital Partners, were preparing bids for Aviva France.
In January 2021, the combination of Aésio and Macif resulted in the creation of Aéma Groupe, a leading French mutual insurer with 8 million customers, revenues of more than €8 billion and €7.4 billion of equity.
Now, Aviva has announced that Aéma Groupe is to acquire its French business for €3.2 billion in cash, a move which significantly strengthens Aviva’s capital and liquidity with an increase in excess capital of c.£2.1 billion and central cash of c.£2.8 billion.
The deal covers the French life, general insurance, and asset management business and the 75% shareholding in Aviva France.
As at December 31st, 2020, the financial impact of the transaction on Aviva is expected to drive an increase in Solvency II capital surplus by c.£0.8 billion and Solvency II cover ratio by c.22 percentage points; increase of excess capital above 180% Solvency II cover ratio by c.£2.1 billion and centre cash by c.£2.8 billion; and drive a reduction in IFRS net asset value of c.£0.5 billion.
The insurer states that it intends 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. Up to £500 million of the proceeds will be used to accelerate repayment of some of the Group’s internal loan with Aviva Insurance Limited.
“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,” said Blanc.
“Aéma Groupe has a strong heritage in the French insurance industry and this transaction will propel it to a top 5 position in the French market. I am confident Aéma Groupe will be an excellent owner of Aviva France,” she added.
Under the terms of the deal, Aviva has agreed to customary warranties and indemnities, which includes a specific indemnity agreement in respect of the ‘known price’ contracts, written by Abeille Vie between 1989 and 1997, that would share the risk in the unlikely scenarios of certain costs in respect of these contracts rising above Aviva France’s already appropriate existing provisions.
Once the deal completes, which is expected by the end of this year, subject to consultation and customary conditions, customers and agents of Aviva France will receive the same level of service from the business and importantly, there’s no impact to customer policies as a result of the acquisition.
Management and employees of Aviva France will transfer to Aéma Groupe with the business, which is planned to operate as a standalone autonomous unit within Aéma.
The agreement to sell its French operations comes after the insurer offloaded its entire 80% shareholding in the Italian life insurance joint venture, Aviva Vita S.p.A, to its partner UBI Banca.
Less than a month later, Aviva reached an agreement to sell its life insurance business in Vietnam to Manulife for an all cash consideration.