The Aviva plc (LON: AV) share price rose 3.20% after announcing that it was exiting its Singlife joint venture in a deal worth £0.8 billion. The company has agreed to sell its 25.9% stake in Singapore Life Holdings Pte Ltd (Singlife) and two debt instruments to Sumitomo Life Insurance Company.
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Sumitomo Life has agreed to pay a total cash consideration of £0.8 billion (SGD 1.4 billion). Aviva will receive the cash payment at the closing of the transaction. Sumitomo Life will pay £0.5 billion (SGD 0.9 billion) for Aviva's equity stake and £0.3 billion (SGD 0.5 billion) for the two debt instruments.
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Sumitomo currently owns a 23.2% shareholder in Singlife and regards Singapore as a crucial market within its overall Southeast Asia strategy. Singlife contributed £17 million to Aviva's operating profit in 2022.
The combined carrying value of the equity stake and debt holdings contributed £729 million to Aviva's IFRS 17 net asset value as of 30 June 2023. The transaction would have increased Aviva's Solvency II shareholder surplus by £0.4 billion as of 30 June 2023 and the Solvency II shareholder ratio by about 8%.
The transaction would also have increased Aviva’s credit liquidity by £0.8 billion, with an equity value representing a 2.2x multiple of the Solvency II Unrestricted Tier 1 Capital as of June 2023. Aviva’s exit from Singlife marks a crucial step in simplifying its business after the international disposal programme was completed in 2021.
The disposal also aligns with the company’s ambition to focus on its capital-light business units. Aviva also sold its majority stake in Aviva Singapore in 2020 to a consortium led by Singlife. The insurance company will consider the disposal proceeds within its existing capital management framework.
The surplus capital can be used for bolt-on M&A, reinvestment in the business, and/or shareholder returns.
Amanda Blanc, Group CEO of Aviva, said: “This is a good outcome for Aviva. The transaction further simplifies the business, and we are in a very strong position to build on our trading momentum in the UK, Ireland and Canada.”
Aviva share price.
The Aviva share price rose 3.20% to trade at 389.05p from Tuesday’s closing price of 377.00p.
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