British insurance giant Aviva has reached an agreement to divest its entire shareholding in its Italian joint venture (JV), Avipop Assicurazioni, which includes its wholly-owned subsidiary Avipop Vita, to Italian bank Banco BPM for €265m in cash.
The announcement comes after Aviva received a notification from Banco BPM whereby the Italian bank did not want to not renew its distribution agreement with Aviva and Aviva’s subsequent decision, announced on 25 August 2017, to exercise its put option.
Avipop Assicurazioni is owned by Aviva and Banco BPM. Together with Avipop Vita, Avipop Assicurazioni distributes life and general insurance products in Italy through Banco BPM’s bank branch network.
In 2007, Aviva established a bancassurance partnership in protection and general insurance with the former Banco Popolare.
The original agreement between Aviva and Banco Popolare included an option for Aviva to offload its entire shareholding to the bank in case of termination of the distribution agreement.
The consideration payable in cash represents 27.1 times Aviva’s share of 2016 earnings after tax and about 1.1 times Aviva’s share of the IFRS net asset value of the business.
The transaction, which is pending receipt regulatory approval, is likely to be completed in 2018. Upon completion, the deal will increase Solvency II capital by almost £0.2bn.