Aviva lining up possible sale of Irish health unit
British insurance giant Aviva is considering a sale of its Irish health insurance business, according to sources close to the situation.
A sale would be the biggest in the sector since Aviva's larger rival Laya Healthcare was sold to AIG earlier this year in a deal understood to have been worth in the region of €90m.
Aviva is Ireland's third biggest health insurer after VHI and Laya. Smaller rival GloHealthcare, which is backed by Irish Life, is tipped by insiders as a possible buyer. A deal would catapult it close to second-ranked Laya in terms of market share.
Its understood that Aviva's general insurance and life assurance operations in Ireland would not be affected by a review of the Irish operations currently underway.
Aviva has around 300,000 health insurance customers in Ireland. Its health arm employs 120 staff and is 30pc owned by AIB.
Any sale of Aviva's majority stake would be in the context of maintaining the business as a going concern, the Irish Independent understands.
Aviva and AIB declined to comment on the potential sale.
Investment bank Macquarie is understood to be conducting the review of the Irish asset, and a decision to sell will be made following that process.
Insurers across Europe are being forced to assess their deployment of capital as a result of incoming regulations known as Solvency 2 which will force institutions to hold more capital as a precaution against potential losses.
It is understood that capital raised from a sale of the Aviva health business would be invested back into the other Irish arms, and that the decision to review the assets was driven by a review of the group's relative return on capital across different businesses.
In that context it is understood that Aviva's preference is to focus capital in the Irish unit on its general and life assurance units.
Financial results in August showed that operating profits at Aviva Ireland nearly doubled from €25m to €45m across the firm's three businesses in the first six months of the year.
That was led by the general insurance business, which saw profits more than double to €23m compared to €11m in the half year period in 2014.
Written premiums and policy count increased by 8pc, the second consecutive year of growth.
Combined operating ratio, a key measure of profitability in insurance, was 93.5pc which was 3.2pc better than the year before. The ratio represents claims and operating expenses as a percentage of premium income. A ratio below 100pc indicates that the company is making underwriting profit while a ratio above 100pc means that it is paying out more money in claims that it is receiving from premiums.
The group's life insurance business saw operating profit rise to €19.5m from €9m. This growth was aided by one-off benefits associated with the branching of its life business from the UK at the end of last year.
However profits halved from €5.1m to €2.6m at the firm's health business. Aviva said that it was impacted by an increase in claims costs and in claims frequency. The firm said at the time that average premiums had fallen as customers opted for lower priced plans at renewal.