Aviva sells US operations

British multinational insurance company Aviva is selling its US operations for 1.8 billion dollars, the firm announced Friday.

The FTSE 100 company said it has agreed to hand over Aviva USA Corporation - its life, annuities and asset management business - to life insurance holding company Athene Holiding.

Aviva will still keep the North American asset activities of Aviva Investors and its assets outside of the US.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

The deal is subject to regulatory approvals and is expected to be completed next year. Goldman, Sachs & Co. and Morgan Stanley and Co. International plc acted as financial advisers to Aviva.

The sale is part of a company downscale in narrowing the group's focus on lucrative businesses and markets.

The transaction will reduce the firm's group credit risk exposure by 25% and the sensitivity of its economic capital results to credit spread movements by 30%.

John McFarlane, chairman of Aviva plc, said: "The sale of Aviva USA is an important step forward in the delivery of our strategic plan. It considerably strengthens Aviva's financial position, increases group liquidity and improves our economic capital surplus whilst also reducing its volatility.

"The disposal of the US business, combined with the recent settlement with Bankia, represents a successful end to the year and sets us up well for 2013."

Aviva will receive sale proceeds of $1.55bn in cash, following the repayment of external debt. Up to $250m of the amount may be taken in the form of an interest-bearing vendor loan, repayable in cash within 12 months of completion.

Aviva USA generated an IFRS operating profit of £223m in 2011 and held £3.2bn IFRS net assets and £39bn IFRS total assets as June 30th, 2012.

Aviva plc shares fell 0.52% to 382.00p at 10:34 Friday.

RD