New Aviva boss Blanc moves fast to shrink British insurer

[LONDON] Aviva's new boss Amanda Blanc is not wasting any time.

When the industry veteran unveiled her first earnings as chief executive officer last month, she vowed "decisive action" and pledged to work "at pace" to reverse a share slump. Fast forward a few weeks, and Ms Blanc has already taken major steps to dismantle the second-biggest London-listed insurer by market value.

Aviva said Sept 11 it will sell control of its Singapore business for S$2.7 billion. It is now pursuing a potential sale of its French unit, which could be valued at about three billion euros (S$4.81 billion), according to people with knowledge of the matter.

The business could draw interest from rival insurers such as AXA or Allianz and industry consolidators like Apollo Global Management-backed Athora Holding, the people said, asking not to be identified because the information is private. Aviva is separately working with an adviser to weigh a sale of its Italian non-life insurance business, according to the people.

Aviva had already started exploring a revamp under Ms Blanc's predecessor. It's been considering options for its Italian life insurance venture with UniCredit SpA, Bloomberg News reported in April. The company's Polish unit is already attracting inbound interest and potential advisers are pitching for roles to help sell it, the people said. Its joint ventures in Turkey and India are also seen as potential divestment candidates, the people said.

Shares of Aviva were down 0.5 per cent at 8.29am Tuesday in London, giving the insurer a market value of £11 billion (S$19.24 billion). They have declined 33 per cent this year, compared with a 23 per cent drop in the UK's benchmark FTSE 100 Index.

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LEGACY CONTRACTS

The divestments could generate billions of pounds that Aviva could return to shareholders or deploy in its core operations in the UK, Ireland and Canada. They're also a boon for investment bankers in a year that's seen European mergers and acquisitions fall 23 per cent to around US$620 billion.

No final decisions have been made, and there's no certainty Aviva will sell the units being reviewed, the people said. French media reported its disposal plans in the country earlier this month.

"Aviva is in the very early stages of developing its strategy for its continental European and Asian businesses," the company said in a statement. Representatives for Allianz, Athora and AXA declined to comment.

Any divestment of Aviva's French unit could be the biggest sale of an insurance operation based in the country in over a decade, data compiled by Bloomberg show. It could be a tough sale, and there may not be a single buyer for the entire operation. Some prospective suitors are concerned about liabilities from legacy contracts that allow some Aviva customers to buy a fund at historical prices, bringing instant profits, the people said.

Ms Blanc said last month that Aviva will be selective about where it competes and will allocate capital in a disciplined manner.

"Let me be clear, if we cannot meet our strategic objectives, we will take decisive action and we will withdraw capital," she said on a call with analysts, referring to operations outside its core markets. "Ultimately, there may be better owners for these businesses than Aviva."

BLOOMBERG