Aviva nets higher proceeds from sale of US arm - UPDATE

3rd Oct 2013 07:15

Aviva has completed the sale of its US business for a higher amount than it first expected. The FTSE 100 insurer said it will receive proceeds of $2.6bn (£1.7bn) from the sale of its US life and annuities business to Bermuda-based Athene Holdings.Aviva said this was around $0.8bn (£500m) more than it had announced last December due to higher earnings expectations and "other improvements". Chief Executive Officer Mark Wilson said the deal represented a "solid outcome" that improved the business. "The sale of the US business is another milestone for Aviva; it simplifies the business, strengthens the capital position and is a step towards our goal of creating a business focused on cash flow and growth."The cash proceeds were also higher as Aviva had repaid an external loan to the US subsidiary, meaning the cash portion of the deal receivable by the company will be $2.3bn.This additional £500m of "unexpected cash" has further de-risked Aviva's financial position, said house broker Morgan Stanley, "(which) modestly adds to solvency ratios - approximately two percentage points on the economic ratio, but more importantly will materially improve the cash position at the centre".While Aviva has not provided any news on its proposed use of the extra cash, the broker noted one possible use would be to further reduce its internal loan balance. "The internal loan balance has already fallen from £5.8bn to £5.1bn year-to-date as a consequence of £0.3bn of cash pay down and a further £0.4bn of non cash. Alternatively, Aviva could decide to run with an even more conservative cash position at the centre."Athene has, in turn, sold the Aviva life insurance business to Commonwealth Annuity and Life Insurance in a separate deal of undisclosed size. Shares in Aviva were up 1.8% to 414.8p at 14:29 on Thursday.OH