Aviva set to buy AIG’s UK operation

To bolster its standing in the UK’s thriving protection market, Aviva plc has unveiled its acquisition of AIG Life Limited (AIG Life UK) from Corebridge Financial, Inc., a subsidiary of American International Group, Inc. (AIG). The acquisition, valued at £460 million, reinforces Aviva’s commitment to expanding its footprint in this sector, where it has already witnessed robust organic growth, garnering acclaim for its high-quality customer offerings.

Aviva’s foray into the protection market has proven to be a triumph, marked by steadfast organic growth and a consistent focus on enhancing the customer and intermediary experience. The acquisition of AIG Life UK, an entity with 1.3 million individual protection customers and 1.4 million group protection members, is poised to further elevate Aviva’s presence in this lucrative arena.

Amanda Blanc, Aviva’s Group Chief Executive Officer, underscored the significance of this strategic move, stating, “This acquisition brings significant strategic and financial benefits to Aviva. It strengthens our prospects in the highly attractive UK protection market and continues our progress in repositioning the Group towards capital-light growth. We look forward to welcoming our new customers and colleagues to Aviva.”

AIG Life UK‘s operational philosophy aligns closely with Aviva’s, emphasising innovative solutions and robust partnership distribution. The amalgamation of the two protection businesses is expected to yield substantial synergies, with AIG Life UK’s successful Small and Medium-sized Enterprise (SME) and high-net-worth propositions enhancing the combined entity’s market reach.

Moreover, AIG Life UK’s extensive network of relationships with regional and corporate Independent Financial Advisors (IFAs) and other key partners will provide an avenue to engage with a broader customer base. This synergy is anticipated to fortify the platform for both existing and prospective customers.

In a strategic move that underscores Aviva’s prudent financial approach, the acquisition will be financed using internal resources, promising a robust financial return with an anticipated low-teens Internal Rate of Return (IRR), which includes integration and restructuring costs. Additionally, the transaction will enable Aviva to recapture the economic benefits of AIG Life UK’s internally reinsured business within the broader AIG Group.

From a financial perspective, the transaction consideration, at 0.9 times AIG Life UK’s Solvency II Own Funds (after accounting for anticipated capital synergies), showcases Aviva’s astute financial management. The estimated impact on the Group’s Solvency II shareholder cover ratio, as of 30 June 2023, would have been a modest reduction of approximately 5 percentage points.

This acquisition aligns seamlessly with Aviva’s capital management framework, preserving the Group’s steadfast commitment to regular and sustainable capital returns in the future. The transaction remains subject to customary closing conditions, including regulatory approvals, and is anticipated to conclude in the first half of 2024.

Aviva’s strategic move to acquire AIG Life UK underscores its dedication to fostering growth, innovation, and providing enhanced protection solutions to its expanding customer base, positioning the company as a formidable player in the UK’s dynamic insurance landscape.