- Largest acquisition by CEO Amanda Blanc
- Aviva shares down 12% year-to-date
- Deal to be funded by Singlelife disposal
Aviva (AV.) has said it will buy AIG’s UK protection business for £460 million, the UK insurer’s shares were little changed on the news, trading down slightly at 394p.
The firm’s shares are down over 12% year-to-date.
The move is seen by the UK insurer as consistent with pursuing a strategy to ‘grow [a] capital light business,’ and embark once again on an ‘acquisition trail’ following years of asset sales.
The transaction consideration represents 0.9x AIG Life UK’s Solvency II Own Funds, after adjusting for expected capital synergies.
The estimated impact on the Group’s Solvency II shareholder cover ratio would have been a reduction of circa 5 percentage points as of 30 June 2023.
Amanda Blanc, group CEO at Aviva, said: ‘This acquisition brings significant strategic and financial benefits to Aviva. It strengthens our prospects in the highly attractive UK protection market and continues our progress in repositioning the group.’
Aviva said that the ‘transaction is subject to customary closing conditions including regulatory approvals and is expected to close in the first half of 2024.
INCREASE IN CUSTOMERS
Analysts at Jeffries said in a research note: ‘Today's deal with AIG will add 1.3 million individual protection and 1.4 million group protection customers to Aviva's business.
‘Interestingly, Aviva will also re-capture the economics of the business that AIG Life UK reinsures internally to the wider AIG Group.’
The deal with AIG will be largely funded by the ‘recent Singlelife’ disposal - which was sold for total consideration of £800 million and ‘internal resources’.
‘We don't see this deal compromising our current buyback forecast for the full year 2023 (£300 million),’ added analysts at Jeffries.
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