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Aviva has received first-round bid approaches for its US arm from US-based private equity houses as well as financial services group Guggenheim Partners, people with knowledge of the matter said.
Second-round bids have yet to come in and the process remains at an early stage, with Aviva not in exclusive talks with Guggenheim, they said.
The identity of the private equity groups and the level at which the offers were pitched were not immediately clear. Analysts say the UK-based insurer would be unlikely to fetch more than half of the £2bn, including debt, it paid for it in 2006.
Last week Aviva took a £876m writedown on the value of its US arm. The business focuses on so-called fixed indexed annuities, which offer customers guaranteed returns and as a result require the business to set aside significant amounts of capital.
Meanwhile, Standard & Poor’s has downgraded Aviva to its lowest level since it began covering the UK insurer in 2001, raising questions about the turnround plan by the new chairman and interim chief executive that involves the sale of the US arm. The rating agency highlighted what it called “significant risks and costs” involved in the strategy John McFarlane set out six weeks ago to shore up Aviva’s balance sheet.
Under the shake-up, the FTSE 100 company is seeking to wind down or dispose of several businesses – including a sale of the US operation – within about 18 months.
“While the plan has positive objectives, such as building financial strength and improving operating performance, we expect a significant period of transition, a high cost of execution, and risks in delivery,” S&P said.
The agency downgraded Aviva plc, the holding company, by a notch from A to A minus. S&P also cut the rating of Aviva’s core operating subsidiaries by a notch, from double A minus to A plus.
The holding company has held the A rating since 2009, when it was downgraded from A plus.
“We expect to see greater pressure on certain debt-related metrics and volatility in results as the restructuring is implemented,” S&P said.
Credit rating downgrades for insurance companies can be significant as brokers use the ratings to help determine the amount of business they should place with them.
However, analysts at Credit Suisse said the downgrade should not have too much impact on Aviva’s operations given its “focus on retail and commercial markets rather than large corporate”.
Aviva declined to comment on the US disposal or the downgrade, but said in a statement it was making “good progress” on the strategic plan and “had taken significant actions over recent months”.
“For example, we have brought down our stake in [Benelux insurer] Delta Lloyd to below 20 per cent, realising a £200m favourable impact on our economic capital position, and materially reduced our Italian sovereign debt holdings by €2bn,” it said.