British insurer Aviva Plc announced the divestment of the entire shareholding in its wholly-owned Vietnam life insurance business, to Manulife Financial Asia Ltd. in an all-cash deal. Shares climbed almost 4% in UK trading.
Financial terms of the deal weren’t disclosed. However, Aviva (AV) stated that the sale of Aviva Vietnam Life Insurance Company Ltd. is expected to increase its IFRS net asset value and solvency II surplus by about £100 million. The transaction, which is subject to certain closing conditions, including regulatory approval, is expected to be completed in the second half of 2021.
As part of the transaction, Manulife will enter into a new distribution agreement with Aviva Vietnam’s existing exclusive bancassurance partner, Vietnam Joint Stock Commercial Bank for Industry and Trade.
Aviva has £522 billion in total assets under management and a solvency II capital surplus of £11.8 billion as of Q320. The insurer, who has seen its stock tumble 22% this year, has been divesting non-core assets in recent weeks, as the company targets solvency II return on equity of 12% by 2022 and cash inflows of £8.5-9 billion in 2019-2022. (See AV stock analysis on TipRanks)
“We will focus on the UK, Ireland and Canada where we have leading market positions and significant potential. We will invest for growth in these markets. Our international businesses in Europe and Asia will be managed for long-term shareholder value,” Aviva commented in a statement. “We will also transform our performance and improve our efficiency. Our transformation will be underpinned by managing our balance sheet prudently, reducing debt and increasing our financial resilience.”
Last week, Aviva finalized the sale of its entire shareholding in its Hong Kong joint venture, Aviva Life Insurance Company Ltd., to its venture partner, Hillhouse Capital, marking the fourth transaction the company has completed this year.
On Nov. 26, the company announced a new dividend policy, and declared a 7 pence per share interim dividend for the financial year 2020, which will be paid in January 2021. Aviva’s board currently expects to recommend a final 2020 dividend of 14 pence per share, which is subject to a final decision to be taken in March 2021. The expected 2020 total dividend of 21 pence per share is then projected to grow by low to mid-single digits.
Following the dividend policy statement, Berenberg analyst Kathy Fear cut the stock’s price target to 453p (38% upside potential) from 477p and maintained a Hold rating, saying that there are more attractive investment stocks in the UK life insurance market, especially in the shorter-term.
From the rest of the Street, the stock scores a Moderate Buy analyst consensus based on 3 Buys and 4 Holds. Meanwhile, the average price target stands at 385.57p and implies 19% upside potential lies ahead over the coming 12 months.
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