Aviva close to the disposal of US business in revamp

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AVIVA, Britain’s second-biggest insurer and a major employer in Yorkshire, is closing in on the sale of its underperforming US business, a key part of its drive to strengthen its finances in an uncertain economic climate and revive its share price.

The disposal, expected “reasonably soon,” is set to fetch less than the £2.4bn at which the unit is valued on Aviva’s books, but should free up capital.

Aviva is four months into a reorganisation in which 16 lagging businesses that contribute 18 per cent of operating profit – but tie up over a third of its capital – will be sold.

The revamp was launched in July by chairman John MacFarlane, who took day-to-day charge of Aviva in May after shareholders, irked by a 60 per cent slide in the company’s share price over five years, forced out chief executive Andrew Moss.

Capital freed through disposals could be used to strengthen the insurer’s reserves against a potential further deterioration in the troubled eurozone. Aviva holds distressed eurozone sovereign debt to generate income for customers in the region, and its exposure has been a worry for investors.

Aviva’s US business, bought in 2006 for £2bn, is the biggest asset in a for-sale list that also includes the group’s minority stake in Dutch insurer Delta Lloyd.

A further eight businesses will probably be sold next year, Aviva said, declining to name them.

The company is on track to appoint a replacement for Mr Moss early next year, Mr MacFarlane said, with non-executive directors interviewing candidates this week.

Finance chief Pat Regan is seen as a likely potential success- or.

Aviva, which sells home and motor insurance as well as life and savings polices across Europe, said total sales fell 5 per cent to £28.9bn in the first nine months of the year, reflecting tough conditions in recession-hit Italy, Spain and Ireland.

Total life and pension sales at the York-based business were flat at £8bn.

Aviva said it UK protection sales were up by 23 per cent, individual annuities were up by 11 per cent and group personal pension sales were up by 15 per cent.

Aviva employs 4,800 staff in Yorkshire – about 300 in Leeds, 1,700 in Sheffield and 2,800 in York.