Aviva approves sale of its French business for €3.2 billion
Aviva’s strategic transformation to focus on its strongest businesses in the UK, Ireland and Canada has taken a major step forward with the sale of Aviva France to Aéma Groupe for €3.2bn2 in cash.
Aviva expects to use the increased capital and cash to support its previously communicated 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.
Aviva France is the largest part of the Group’s manage-for-value portfolio and has not remitted any dividends to Aviva plc in 2020. Aviva France’s core business is capital intensive and this transaction will reduce the volatility in the Group’s solvency ratio by removing exposure to interest rate risk from the Eurofonds guaranteed life insurance product.
As part of the transaction with Aéma Groupe, Aviva has agreed to customary warranties and indemnities. This 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. This will have a negligible impact on Aviva’s solvency position.
The transaction is subject to consultation and customary conditions, including regulatory approvals, and is expected to complete by the end of 2021.
Aéma Groupe is a leading French mutual insurer, with 8 million customers, revenues of over €8 billion and €7.4 billion of equity, created in January 2021 as the result of the combination of Aésio and Macif. Management and employees of Aviva France will transfer with the business, which is planned to operate as a standalone autonomous entity within the Aéma Groupe, ensuring continuity of service.
In 2019, Aviva France’s IFRS profit after tax was £293m. The gross assets and IFRS net asset value of Aviva France were £91.2bn and £2.4bn respectively as at 30 June 2020. The French asset management operations of Aviva Investors will form part of the transaction. As at 30 June 2020, these asset management operations had assets under management of £105bn and generated IFRS profit after tax of £33m6 in 2019.
“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 5 position in the French market. I am confident Aéma Groupe will be an excellent owner of Aviva France.” – Amanda Blanc, Chief Executive Officer of Aviva