LONDON, April 12 British insurer Aviva
may struggle to sell its American operations, estimated to be
worth some 1 billion pounds ($1.6 billion), due in part to a
tough regulatory environment, investment bankers familiar with
the industry said.
Aviva Chief Executive Andrew Moss recently told an investor
conference that the company would be open to offers for its
American unit, two sources with knowledge of the matter said on
Thursday. Aviva declined to comment.
Bankers said potential European buyers could be put off from
bidding because of new European insurance rules due to come into
force, the so-called Solvency II capital directive.
Solvency II could force European companies to hold more
capital against their American businesses if European regulators
decide U.S. capital standards for insurers are less exacting
than their own.
"That leaves North American buyers like Prudential Financial
and MetLife and there is no guarantee they would
want to buy as opposed to just writing more new business of
their own," said one banker.
A second banker added there was a slim chance a Japanese
insurer might take a look, but only if it were very keen to
enter the United States, since some large Asian insurers have
recently bulked up in the region.
Tokio Marine has been bagging bigger and more
expensive deals abroad, including a $2.7 billion acquisition of
U.S. insurer Delphi Financial Group.
Meiji Yasuda Life Insurance Co, Japan's
second-biggest insurer, also said in January it wanted to do
deals and was planning to acquire one or two overseas companies
in emerging economies this year.
Shore Capital analyst Eamonn Flanagan said that if Aviva did
manage to sell Aviva USA, it would be well received by its
shareholders since the business has underperformed in relation
to its domestic rivals.
The acquisition was made under previous chief executive
Richard Harvey at a cost of around 2 billion pounds, including
debt, and was part of a plan for the company to expand globally.
Moss has been refocusing Aviva around the UK and Europe.
"It would remove an under-performing unit and one that
suffers poorly by comparison with Prudential's Jackson
National," said Flanagan.
"Secondly, it takes out a capital-intensive business from
Aviva's stable - a positive move in the group's focus on
improving its RoE (return on equity)."
Aviva USA, previously branded AmerUs is a large provider of
equity-indexed annuities, where returns are usually linked to an
underlying equity index, but its business has been hit by the
recent market volatility.