November 8, 2012 9:26 am

Aviva warns of heavy loss on US sale

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Aviva outlines plans to boost share price

Aviva on Thursday told its shareholders to brace themselves for a heavy loss on the imminent sale of its US arm, adding that its search for a new chief executive had reached an advanced stage.

The UK-based insurer said the disposal would be at a “substantial discount” to its £3.2bn holding value in its accounts but would nonetheless be worthwhile because of the capital the sale would release.

“We believe any such sale would be in the best interests of the group and we are hopeful of a satisfactory resolution reasonably soon,” it said.

Thursday’s comments, made in a third-quarter trading update, were the first confirmation by the company that it was seeking to sell the US business.

The Financial Times reported in August that Aviva had received first-round bids from US-based private equity houses as well as Guggenheim Partners, a financial services group. Market speculation has placed a price tag of £1bn or so on the unit.

The British company had already written down the book value of the unit by £876m at its half-year results in August.

The US sale is at the centre of a strategy unveiled in July by John McFarlane, Aviva’s executive chairman, to shore up the group’s balance sheet and improve its share performance.

Mr McFarlane took over the leadership of the FTSE 100 group in May as an interim measure after Andrew Moss stood down as chief executive following a revolt by investors.

Under his turnround plan, Aviva is looking to withdraw from 16 out of 58 business segments within the group.

It has already sold slightly more than half its remaining shareholding in Delta Lloyd, the Dutch insurer it used to fully own. It has also agreed a deal to pull out of Sri Lanka.

On Thursday, Aviva said eight disposals – all smaller than the US deal – were likely to take place in 2013. Five other units were undergoing drastic action, such as being wound down.

Aviva said shortlisted candidates for the CEO post were being interviewed by non-executive directors, after which the board would seek regulatory approval for its preferred candidate.

The trading statement showed that Aviva’s sales for the first nine months of the year were down 5 per cent on a year earlier at £28.9bn. Shares in Aviva rose 1.2 per cent to 332.3p in early trading in London on Thursday.

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