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Aviva sells French arm for e3.2 billion as new CEO Amanda Blanc focuses the insurance giant

Complex deal struck despite liability of “golden ticket” product that paid fortunes to clients

Aviva
By @ArmitageJim
23 February 2021
I

nsurance giant Aviva today struck a deal to sell its vast French operation for more than e3 billion in new chief executive Amanda Blanc’s biggest coup to date.

Aviva France is to be sold to Aema Groupe as part of Blanc’s plan to slim down the company and focus on solely its UK, Irish and Canadian operations.

The French division is the largest and most complex of Aviva’s up-for-sale foreign operations, consisting of life insurance, general insurance, a financial network and agents, plus relationships with joint venture partners.

It also includes a poison pill in that Aviva France still faces from liabilities for a bizarre financial product sold in the eighties and nineties that practically guaranteed huge profits for investors and losses for Aviva.

While it was known Aviva was in sale talks, those complexities, worsened by Covid disruption, were seen as major obstacles to a sale.

The deal follows Blanc’s disposal of Aviva’s Singapore arm for £1.6 billion in September, Vietnam in December for an undisclosed sum and Aviva Vita in Italy for e400 million in November.

Blanc arrived in post in July last year at a time of turmoil at the group. She took over from Maurice Tulloch, who replaced the ousted Mark Wilson just 15 months earlier.

Shareholders had demanded faster, more dramatic change than Tulloch had proposed, and since her arrival last July, she has turbocharged a disposal programme at the company.

Investors will now be expecting a return of capital from the French sale, although they will have to wait until next Thursday’s full year results for more details.

In November, with its third quarter figures, Aviva said it would be using excess capital to reduce debt, invest in the business and fund returns to shareholders.

Blanc said: “The sale of Aviva France is a very significant milestone in the delivery of our strategy... It is an excellent outcome for shareholders, customers, employees and distributors.”

The deal will free up capital for Blanc to invest in the core businesses. France has been an expensive place to operate, being highly capital intensive. It failed to pay any dividends up to the Aviva plc throughout 2020 and also carries interest rate risks from a product it calls Eurofonds.

As part of the deal, Aviva has agreed to indemnify Aema for future costs arising from a bizarrely self-destructive product its Abeille Vie division made which allowed clients to backdate investments to their price eight days prior to the investment. So, if the Asian market rose, Abeille Vie customers could buy into it at the price eight days before the gains happened.

The product ran from 1989 to 1997. While other insurers began buying back similar contracts when they realised how dangerous they were, Aviva did not, instead refusing to execute orders and scaling back the trades allowed.

This led to litigation which is still ongoing, particularly from Abeille Vie posterboy Max-Herve George, who was given the product when he was seven years old in what the Financial Times has described as a “golden ticket” and “the worst contract in the world”.

The indemnity in the deal covers Aema for any costs above the provisions Aviva France has already made. Provisions set aside in Aviva France to pay out on the contracts will transfer to Aema as part of the deal, while Aviva Plc will share in any future costs on top of those amounts.

“This will have a negligible impact on Aviva’s solvency position,” Aviva said.