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Aviva rises on Singapore sale

Amanda Blanc’s first move as CEO has been warmly received by the market
Aviva rises on Singapore sale

Shares in Aviva (AV.) jumped 6 per cent on Friday afternoon, after the insurance giant confirmed it would sell its majority stake in its Singapore division for £1.6bn.

IC TIP: Buy at 300p

Under the terms of the deal, Aviva will receive SGD 2bn (£1.2bn) in cash and SGD 250m in vendor finance notes. It will also keep a 25 per cent equity stake in a newly-created group that combines Aviva Singapore with rival Singlife and is backed by a consortium including private equity firm TPG and Japanese insurer Sumitomo Life.

The disposal makes good on newly-appointed chief executive Amanda Blanc’s pledge to focus on the UK and Ireland, and re-shape the sprawling FTSE 100 constituent into a leaner operation. It also reverses a decision made in 2019 to keep the fast-growing Singaporean arm, following a review of the group’s Asian operations.  

At almost 19 times’ the division’s 2019 post-tax profits and almost two times its most recent net asset value, the valuation also looks attractive. By contrast, Aviva shares trade at a 40 per cent discount to their book value.

Following the deal’s announcement, Ms Blanc also acquired £1m-worth of stock at a strike price of 307.8p, the highest Aviva has traded since the shares capitulated with the broader market in March.

FactSet-compiled forecasts are for earnings of 50p per share in 2020, rising to 55p in FY2021.