British insurer Aviva Plc has agreed to exit its joint venture with Singapore Life Holdings (Singlife) by selling its 25.9% stake to Sumitomo Life Insurance Company (Sumitomo Life) for 800 million pounds (around $1 billion).
According to a statement released by Aviva on Wednesday, Sumitomo Life, the Japanese insurance company headquartered in Osaka, will pay 500 million pounds for Aviva’s equity stake in the JV and another 300 million pounds for two debt instruments.
Sumitomo Life is currently the third largest shareholder in Singlife with Aviva, the joint venture between Singlife and Aviva. It holds a 23.2% share in the joint venture and sees Singapore as a key market within its overall Southeast Asia strategy, according to the announcement.
Singapore-based Singlife merged with Aviva’s local unit in 2020 at a combined valuation of S$3.2 billion ($2.3 billion). The merged entity was rebranded as Singlife with Aviva in 2022.
“This is a good outcome for Aviva. The transaction further simplifies the business and we are in a very strong position to build on our trading momentum in the UK, Ireland, and Canada,” said Amanda Blanc, group CEO of Aviva who has refocused the firm on the UK, Ireland and Canada in recent years.
The divestment is subject to customary closing conditions, including regulatory approvals, and is expected to complete in the last quarter of this year.
Aviva said Singlife contributed 17 million pounds to its operating profit in 2022 and the combined carrying value of the equity stake and debt holdings contributed 729 million pounds to Aviva’s IFRS 17 net asset value as on June 30, 2023.
“Aviva’s exit from the Singlife joint venture represents a further step in the simplification of Aviva’s footprint following the international disposal programme completed in 2021,” according to the announcement.
Singlife reported a net profit of about $193.4 million in 2022 against a loss of $95.86 million in 2021. The profit growth was attributed to strong underwriting results from its insurance portfolio and a financial reinsurance arrangement that the company entered into in 2022.
The company’s auditors noted that as of December 31, 2022, Singlife had S$10 billion of life insurance contract liabilities, which account for 81.6% of the group’s total liabilities for the year. In 2021, the group had S$10.6 billion of life insurance contract liabilities, but it only represented 77.9% of its total liabilities.
Singlife generated net cash of S$407.4 million from operating activities and spent S$173.2 million on investing activities and another S$363 million on financing activities, according to its consolidated cash flow statement for 2022. As a result, its cash and cash equivalents declined by about 26% year on year to S$369.8 million.