Aviva Cuts Delta Lloyd Stake in Bid to Reduce Non-Core Benelux Presence

Aviva plc said it will further reduce its stake in Netherlands-based multiline insurer Delta Lloyd Group, citing its strategy of de-emphasizing low-priority markets.

U.K.-based Aviva said it will dispose of about 15% of Delta Lloyd’s ordinary share capital, cutting its stake in the insurance and banking group to 43% from 58%. Once it obtains shareholder approval through a May 4 extraordinary general meeting, Aviva said it would partly dispose of the stake through a private placement to institutional investors by offering about 25 million Delta Lloyd shares.

The offering price will be determined after an accelerated book-building process.

Aviva said Delta Lloyd’s Benelux market is not one of the 12 core markets where Aviva believes it has the scale to achieve significant growth. Aviva said proceeds from the share sale would be held as cash or cash equivalents on its books and will enhance its liquidity position.

Delta Lloyd’s share value rose 19% since its public offering that was priced at 16 euros a share in November 2009, according to Aviva.

Since the share sale would bring Aviva’s share of the total voting rights in Delta Lloyd to less than 50%, Aviva will no longer consolidate Delta Lloyd’s results in its financial results once the transaction is complete. Had that deconsolidation taken place last year, it would have reduced Aviva’s total IFRS assets by 58 billion pounds (65.7 billion euros) to 312 billion pounds, the group said.

Aviva in March announced a 44% rise in after-tax profit for 2010 to 1.9 billion pounds, and at the same time announced a new strategic assessment of its approach to global markets in which it would target profitable general insurance markets beyond the United Kingdom and focusing on long-term savings on the life side (BestWire, March 3, 2011).

That new strategic focus include emphasis on the 12 strategic markets, mainly in Europe and the United Kingdom, where Aviva has strong market share. Aviva said it would also seek to take further advantage of the combination of its life and general insurance products under one brand.

Delta Lloyd Group offers life and general insurance, asset management and banking products and services. The group’s target markets are the Netherlands and Belgium. It operates mainly under the brand names of Delta Lloyd, OHRA and ABN AMRO Insurance in the Netherlands, and under the Delta Lloyd brand name in Belgium. Delta Lloyd employs 6,080 people.

Late last year, A.M. Best Europe -– Rating Services Ltd. revised the outlook to positive from stable and affirmed the issuer credit rating of a- of the nonoperating holding company Aviva plc (BestWire, Nov. 30, 2010). The financial strength rating of A (Excellent) and ICR of a+ was affirmed for Delta Lloyd NV. The outlook for these ratings is stable.

(By David Pilla, international editor, BestWeek: David.Pilla@ambest.com)