Following a strategic review of the offshore part of the business, Aviva concluded it was not central to the group’s strategy to focus on a small number of markets where it has scale and profitability or a distinct competitive advantage.
According to Aviva bosses the sale of Friends Provident International to RL360 Holding Company Limited, a subsidiary of International Financial Group Limited and formerly part of rival insurer Royal London, will allow Aviva to further reallocate capital to businesses that can achieve leading market positions and deliver superior returns.
The consideration represents a multiple of 3.2 times Friends Provident International’s 2016 net asset value.
The transaction will result in an increase of about £100m in Aviva’s Solvency II capital surplus.
In the past some life assurers have tried to be ‘all things to all men’ but this approach doesn’t work.Patrick ConnollyThe transaction will also create a tax loss on disposal of about £130m, which is primarily due to the intangible assets held on Aviva’s balance sheet arising from Aviva’s acquisition of Friends Provident International in 2015.
In 2016, Friends Provident International made a post-tax loss of £2m and did not remit any cash to Aviva Group.
As a result, a disposal of Friends Provident International is expected to be positive to Aviva’s cash dividend paying capacity.
According to Aviva, Friends Provident International will continue to serve customers, partners and intermediaries as usual and there is no change to customers’ policies as a result of today’s announcement.
The transaction is subject to customary regulatory approvals and is expected to complete in early 2018.
Chris Wei, executive chairman for Aviva Asia & Friends Provident International, said: “The sale of Friends Provident International Limited is a good outcome for Aviva.
“It allows us to focus on the significant opportunities we have to grow Aviva’s business across Asia through digital and disrupting the traditional insurance industry.”
Friends Provident International employs around 500 staff worldwide and services in the region of 180,000 policies.
The provider has its head office in the Isle of Man, where new owner IFGL is also headquartered.
Friends Provident International has more than 35 years of international experience providing savings, investment and protection products to customers across the globe, with a particular expertise in Asia and the Middle East.
IFGL was formed in October 2013 to support the management led buyout of RL360 from the Royal London Group, with the support of its financial backers Vitruvian Partners.
IFGL has also bought CMI Insurance Company Ltd (now branded RL360° Services) in 2015 and wealth platform Ardan International the following year.
Friends Provident International has £7.6bn in funds under management and its addition to IFGL will take the group’s combined assets to £15.9bn and policies to 250,000.
David Kneeshaw, chief executive of IFGL, said: “Welcoming Friends Provident International to the IFGL Group’s already impressive stable fits with our stated long-term goal of high-quality acquisitions to complement our existing international business.
“Friends Provident International’s strong franchise and its branch structure make the business an ideal fit with IFGL and we see significant opportunities for the businesses to work together and grow.
“Our immediate aim, once we have received regulatory approval for the deal, will be to look at how best we can integrate Friends Provident International into the group.”
Patrick Connolly, head of communications at Chase de Vere, said there has been a great deal of consolidation in the life assurance industry and there will be more to follow.
He said: “In the past some life assurers have tried to be ‘all things to all men’ but this approach doesn’t work and they need to focus on core areas where they can be competitive and believe they can add value to consumers. This is exactly what Aviva is doing here.”
emma.hughes@ft.com
