Aviva PLC nears sale of U.S. unit

The Royal Exchange in London. Photo credit: Matt Banks The Royal Exchange in London. Photo credit: Matt Banks

In its just released Q3 management statement, Aviva PLC said it is close to selling its U.S. life and annuity business. However, the company also stated the sale will most likely come at a “substantial discount” to book value.

In the statement co-signed by chairman John McFarlane and CFO Patrick Regan, the company noted that even a discounted sale would produce a capital surplus. “We are hopeful of a satisfactory resolution reasonably soon,” they wrote. A report from Bloomberg Businessweek put the book value of the U.S. unit at £2.4 billion, or $3.8 billion.

Discussions are ongoing and the company release didn’t specify any suitors by name. Published reports have speculated on interested parties that may include Guggenheim Partners.

A spokesperson for Aviva USA said the company was not in a position to comment any further.

Since midyear, the U.K.-based insurer has plotted a course to dispose of non-core business lines and lower expenses. In July it reduced its share of Dutch insurer Delta Lloyd and cut its holdings of Italian sovereign debt. The company continues on its search for a new CEO as well. Earlier this year, Andrew Moss resigned and was replaced on an interim basis by McFarlane.

In the U.S., the company said due to low interest rates, it has re-priced its equity indexed annuities three times so far this year. Annuity sales fell 5 percent in Q3 compared to the second quarter and the firm anticipates a further reduction in sales.

Between January and September, total life and pension sales at Aviva dropped 10 percent to £18.8 billion.

Aviva entered the U.S. market in 2006 when it acquired AmerUs Group for $3.1 billion. Aviva USA, as it was eventually renamed, is a major player in the domestic indexed annuity business.

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