INSURANCE giant Aviva is considering selling its US business, which is estimated to be worth around £1bn – but analysts say that regulatory conditions mean it may struggle to dispose of the division.
Chief executive Andrew Moss reportedly told an investor conference that the company is open to offers for its American unit, which was acquired by his predecessor for over £2bn in 2006.
However potential European buyers could be put off from bidding because of the introduction of the so-called Solvency II directive which will require European firms to hold more capital against their American businesses.
Barrie Cornes, an insurance analyst at Panmure Gordon says a disposal is not sensible in the short term: “The US operation has effectively been on the stocks for over two years, but Aviva would not consider letting it go for an indicated 50 per cent discount to the price that it paid for it in 2006.”
“Whilst obviously Aviva would consider any serious offer for any part of the business, in our view a suitable offer is unlikely in the short-medium term,” he added.
Moss has a long-held aim to concentrate its efforts on its 12 core markets – including America – but faces pressure from shareholders to improve results. Aviva USA specialises in equity-indexed annuities, a business that requires substantial amounts of capital.
Shares in the firm closed up less than one per cent at 313.4p.
Aviva declined to comment.