Aviva plc (“Aviva”) has reached a significant milestone in the execution of strategy, with the agreement to sell its entire shareholding in Aviva Poland to Allianz for a cash consideration of €2.5 billion, valuing the acquired business at €2.7 billion.
Aviva will now focus on its strongest businesses in the UK, Ireland and Canada where it has leading market positions and strong growth potential. The divestment of Aviva Poland is the eighth transaction Aviva has announced in the past eight months, and this successfully concludes the planned refocus of the Group’s portfolio.
- Realises significant value for shareholders: all cash consideration at 16.9x IFRS profit after tax, 5.7x IFRS net asset value and 2.3x Solvency II Own Funds
- Significantly improves Aviva’s financial strength with an increase in excess capital of £1.5 billion and Solvency II cover ratio by c. 13 percentage points
- Uplift in IFRS net asset value of £1.8 billion, representing a 46 pence per share increase from 31 December 2020 IFRS net asset value per share of 493 pence
Amanda Blanc, Chief Executive Officer of Aviva, said:
“The sale of our Polish business is an excellent conclusion to the refocusing of our portfolio announced just eight months ago. The sale of our eight non-core businesses will generate total cash proceeds of £7.5 billion. We have made significant progress with our debt reduction plan and in due course we will make a substantial return of capital to shareholders. Our strategic focus is now on our strongest businesses in the UK, Ireland and Canada where we have leading market positions and strong growth potential.”
“This transaction delivers excellent value for Aviva shareholders. It is also a very positive outcome for our customers, employees and distribution partners and we are confident that Aviva Poland will continue to prosper under Allianz’s ownership.”
There will be no impact on customers’ policies as a result of this announcement. Customers and distribution partners of Aviva Poland will continue to receive the same high-quality service from the business. The management and employees of Aviva Poland will transfer with the business.
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. The transaction is subject to customary closing conditions, including regulatory and anti-trust approvals, and is expected to complete within 12 months.
In 2020, Aviva Poland’s IFRS profit after tax was £130 million. The IFRS gross assets and net assets value of Aviva Poland were £3.9 billion and £0.4 billion respectively as at 31 December 2020. Aviva Investors Poland, which manages funds of Aviva Poland, will be part of the transaction. The assets under management of Aviva Investors Poland was £3.7 billion at 31 December 2020 and IFRS profit after tax in 2020 was £4 million.
Reducing debt is admirable of course, but there is so much potential for progress right now that rewarding shareholders should be a bit lower down on the list.
The move frees up product investment cash for Aviva which offers an exciting proposition for the UK market, as partnerships with insurtechs or claims or data specialists can be forged, new ideas can be road-tested.
There are several growing niches such as cyber, healthcare and micro-mobility that can be explored. A big brand name like Aviva should also be a pioneer in voice search for insurance via Alexa and other smart home/lifestyle gadgets. There is no reason why people should not shout `Aviva, find cheaper car insurance’ at their smart speaker or TV.
Then there is data driven car cover. A long time ago when Aviva was called Norwich union it offered a thing called the Rider policy, which allowed anyone with a full motorcycle licence the option to ride another bike, still Fully Comp. As data is now powering the underwriting of risk there is the chance to offer bikers, and car drivers, the same broad-based, truly personalised cover, on a temporary basis via smartphone login.
Building future insurance products that people want to use as utilities, in the background, is the most important function of any insurer.