Aviva to sell Singapore business for $1.98bn as CEO Blanc begins revamp

Insurer Aviva has agreed to sell a majority shareholding in Aviva Singapore to a consortium led by Singapore Life for S$2.7 billion ($1.98 billion), as part of the company's transformation strategy under new chief executive officer  Amanda Blanc.

Aviva said the proceeds will be used to further strengthen its central liquidity and will be considered as part of the company's broader capital management and debt reduction objectives.

Blanc, who replaced Maurice Tulloch in July, promised to take "decisive action" to transform the company's performance and sharpen its focus on its strongest businesses in the UK, Ireland and Canada.

As part of the sale agreement, the new business will be initially branded as Aviva Singlife.

The Singlife consortium includes TPG, a global private equity investor, which will become the largest shareholder in the new group upon completion, Sumitomo Life, a Japanese insurer, and other existing Singlife shareholders.

On completion, Aviva will receive S$2.7 billion in consideration, which is comprised of S$2.0 billion in cash and marketable securities, S$250 million in vendor finance notes and a 25 percent equity shareholding in the new group. The transaction represents a multiple of 18.7x Aviva Singapore’s 2019 IFRS profit after tax, 2.0x Solvency II Own Funds at 30 June 2020 and 1.9x Net Asset Value at 30 June 2020.

The transaction would have increased Aviva’s net asset value at 30 June by £0.7 billion, strengthened Solvency II capital surplus by £0.5 billion and increased the Group Solvency ratio on a shareholder basis by approximately 4 percentage points. In 2019, Aviva Singapore’s IFRS profit after tax was £83 million and it remitted £46 million cash to the group. The gross assets of Aviva Singapore were £6.6 billion at 30 June 2020.

Aviva said that there will be no impact to customer policies as a result of the sale.

The transaction is subject to customary closing conditions, including regulatory approval, and is expected to complete by January 2021.

"The sale of Aviva Singapore is a significant first step in our new strategy to bring greater focus to Aviva’s portfolio," said Blanc. "We have achieved excellent upfront value for shareholders but have also retained an investment in a leading Singapore life business with attractive long-term growth potential.

"The proceeds from the sale will further strengthen our financial position and enhance our ability to meet our strategic objectives. We continue to work at pace and are seeking to take decisive action on our portfolio with the goal of further enhancing long-term value for our shareholders."