The sale of Aviva USA may be closer to reality after the acting head of the unit’s U.K.-based parent company stated that the company will consider the disposition of some of its business lines.
In a statement released Thursday, John McFarlane, executive deputy chairman, outlined a set of priorities for Aviva PLC.
“Firstly, a strategic review of all our businesses to ensure we are focused on the right segments; that we put in place plans to advance the performance and position of our businesses strategically, and exit sensibly those that are not part of our future,” McFarlane said. An update on the process will come in July, he added.
McFarlane further stated that the company is on the hunt for a new CEO, which he expects to take the remainder of the year. The previous CEO, Andrew Moss, quit earlier this month over shareholder objections to executive pay packages.
In April, reports surfaced that Aviva PLC was considering the sale of its U.S. unit, which is based in Des Moines, Iowa. Aviva USA is a major player in the indexed annuity business.
In an article in Bloomberg News, Marcus Barnard, a London-based analyst at Oriel Securities, Ltd., said the U.S. unit and other smaller business groups could be up for auction. “Depressed valuations means that exits will probably be difficult and where possible, are likely to be dilutive,” he said.
In the statement released Thursday, Aviva said that in the U.S., its life and annuity sales grew 32 percent in the first quarter to £1,034 million, from £786 million in the same quarter a year earlier, with annuity sales increasing 38 percent and life sales 17 percent. The life new business IRR was 13 percent, down from 14 percent in the first quarter of 2011. “Sales in 1Q11 were particularly low and as a result we expect sales growth compared with the prior year to moderate considerably in the remainder of 2012,” according to the statement.
A spokesperson for Aviva USA declined to comment on the matter, but sent this statement from Aviva USA president and CEO Chris Littlefield: “We had a very strong first quarter, successfully growing both life and annuity sales and further strengthening our capital position. In particular, life insurance sales were up 15 percent over the first quarter of 2011, and now account for more than a quarter of total U.S. sales. Annuity sales saw strong growth of 36 percent with the total annuity account value on the books continuing to climb. In today’s marketplace, our indexed products provide the right fit for many customers. They offer protection from risk in the event of a market downturn, while maintaining the opportunity to benefit if the market does well.”
With low interest rates in the U.S. and Solvency II regulations in the works in Europe, the sale of annuities is becoming more difficult for insurers as reserving requirements are heightened. Observers have speculated that could be the impetus behind Aviva PLC looking to dispose of its U.S. branch.