Aviva said on Monday it had agreed to buy the UK life insurance business of AIG for 460 million pounds ($563 million), in the largest acquisition to date by the British insurer’s CEO Amanda Blanc. The FTSE 100 insurer said purchasing AIG’s life protection business would drive “significant strategic and financial benefits.” The deal will be Aviva’s second biggest acquisition after its 2022 purchase of Ellipse for PS158 million.
The UK deal adds 1.3 million individual and 1.4 million group protection customers to Aviva’s existing book while accelerating the FTSE 100-listed company’s growth in the protection market. It is also an example of the ongoing attractiveness of the UK insurance sector for major players despite potential Brexit challenges.
The deal is expected to be completed in the first half of 2024 and will be funded from internal resources, delivering strong financial returns with an expectation of a low-teens IRR, including integration and restructuring costs, Aviva said. The transaction will also allow Aviva to re-capture the economics of the business that AIG Life UK reinsures internally to the broader AIG Group.
Aviva said the purchase of AIG’s UK protection business “exemplifies our strategy to grow our capital-light businesses and accelerate our growth in the protection market.” It will deliver a higher-quality customer experience, more innovative solutions, and grander scale and efficiency to serve intermediaries and consumers. It added that it will also provide access to the Corebridge Financial platform and enable Aviva to leverage the opportunities offered by digital and data.
AIG’s UK life business was set up in 2014 after the AIG takeover of Ageas Protect. It is now one of the leading providers in the UK protection market, with a reputation for high-quality customer propositions and continuous improvements to products and services for both consumers and intermediaries.
In a statement, Aviva said that the deal was expected to be completed in the first half of the year, subject to customary closing conditions and regulatory approvals. It will represent a 0.9x multiple of AIG Life UK’s Solvency II Own Funds after adjustment for expected capital synergies, the FTSE 100-listed insurer said. It estimated that the transaction would reduce its solvency II shareholder cover ratio by c. five percentage points as of June 30, 2023.
The sale of AIG’s UK protection business marks the latest asset sales by the insurer, which has been trying to shed non-core assets and focus on its core markets since taking over as chief executive in 2021. It aims to raise as much as $5 billion selling assets this year, which would help reduce debt at the firm.
