Aviva - Sale of businesses

Aviva PLC
18 October 2002


Aviva to sell its general insurance businesses in Australia and New Zealand to
Insurance Australia Group

18 October 2002



 -   Aviva to sell its general insurance businesses in Australia and New
     Zealand to IAG
     
 -   Total cash consideration of A$1,855 million (£651 million), including
     pre-completion dividend
     
 -   Consideration equivalent to 2.1 times net asset value
     
 -   Businesses account for 2% of Aviva net premiums written for the six
     months ended 30 June 2002


Aviva plc ('Aviva') announces that it has entered into an agreement to sell
its general insurance operations in Australia and New Zealand (the
'Businesses') to Insurance Australia Group Limited ('IAG'), Australia's
largest general insurer, for A$1,855 million (£651 million) in cash, including
a pre-completion dividend. The agreement follows an unsolicited approach from
IAG.

Aviva is retaining its long-term savings and asset management operations in
Australia including Navigator, Norwich Union Life Australia and Portfolio
Partners. They operate with different brands, management teams, platforms and
distribution networks to the Businesses.

The sale is subject only to regulatory approval and is expected to complete in
the fourth quarter of 2002. Had the sale of the Businesses been completed on
30 June 2002, it would have resulted in an estimated increase in Aviva Group's
reported net asset value per share of 11 pence to 522 pence. Aviva will not
provide any guarantees in respect of the claims reserves of the Businesses
and, beyond customary warranties, will not retain continuing operating risk.
There will be no price adjustments to reflect the Businesses' results leading
up to or on the date of completion.

Under the terms of the agreement, IAG will acquire CGU Insurance Australia
Ltd. and Belves Investments Ltd. These two subsidiaries are the holding
companies for all of Aviva's general insurance businesses in Australia
(including CGU Insurance, Swann Insurance, CGU-VACC and 51% of MCGI) and New
Zealand (New Zealand Insurance Limited ('NZI')) respectively.

As at 30 June 2002, the Businesses had net assets, excluding acquired
goodwill, of £309 million (based on current exchange rates). In the six months
ended 30 June 2002, they reported net premiums written of £335 million and
operating profit after tax of £16 million.



Richard Harvey, Group Chief Executive said:

'This is an excellent deal for Aviva's shareholders. We assessed IAG's
approach from a perspective of creating shareholder value. This was the key
driver to accepting this unsolicited but compelling offer at a multiple of
more than twice net asset value.

'The price is equivalent to 6% of our market capitalisation. In contrast, the
Businesses account for approximately 2% of our results, whether measured by
premium or profit. The proceeds of the sale and the consequent capital
released will increase our financial flexibility and enable us to pursue
attractive growth opportunities in the profitable development of our long-term
savings business.

'While this transaction marks our exit from general insurance in Australia and
New Zealand, we remain committed to long-term savings and asset management in
Australia and to further developing our businesses outside Europe.'



ENQUIRIES:

Analysts/Investors:

Steve Riley, Investor Relations Director
[phone]



Media in Australia and New Zealand (on 18 October 2002):

Philip Twyman, Group Executive Director
[phone] or [phone]



Media Outside of Australia and New Zealand:

Richard Harvey, Group Chief Executive
[phone]

Hayley Stimpson, Director of External Affairs
[phone]

Alex Child-Villiers, Financial Dynamics
[phone]



NOTES TO EDITORS

Information on the Businesses

The Businesses are headquartered in Melbourne and Auckland, with 
3,611 employees as at 30 June 2002. They accounted for 8% of Group general
insurance net premiums written and 5% of Group general insurance operating
profit after tax for the six months ended 30 June 2002 as well as for 3% of
Group net assets as at 30 June 2002.

The two main operating companies of the Businesses are:

 -   CGU Insurance Australia Ltd., the fourth largest general insurance
     company in Australia in terms of gross premiums written, with a market
     share of 11%. It offers a broad range of personal, rural and
     commercial lines products, with specific strengths in motor and credit
     insurance. The company has been operating in Australia since 1830. As
     at 30 June 2002, the company had net assets of £238 million excluding
     the value of acquired goodwill of £44 million.
     
 -   NZI, the third largest general insurance company in New Zealand in
     terms of gross premiums written, with a market share of 18%. It
     offers a broad range of personal, rural and commercial insurance
     products. The company was formed in 1859 and is one of New Zealand's
     largest and longest serving fire and general insurance companies. As
     at 30 June 2002 the company had net assets of £71 million.




Information on operations retained in Australia

Aviva is retaining its long-term savings and asset management operations in
Australia.  These include:

 -   Navigator, the second largest Master Trust 'funds supermarket'
     platform in Australia (in terms of net inflows) with funds under
     administration of £3.2 billion as at 30 June 2002 and market share of
     10%.
     
 -   Norwich Union Life Australia, the tenth largest life insurer in
     Australia in terms of new business premiums, with a market share of
     2%. Norwich Union Life Australia provides a wide range of life
     insurance products including yearly renewable term, critical illness,
     disability income, savings plans, bonds and immediate annuities.
     
 -   Portfolio Partners, a manager of wholesale funds and retail unit
     trusts in Australia with funds under management of £3.3 billion as at
     30 June 2002.




Financial effects of the transaction

(1)  Subject to completion, the increase in net asset value per share
     related to the sale of the Businesses to be reported in the Group's
     financial statements for the year ended 31 December 2002 will differ
     from the estimated 11 pence per share stated above. This will reflect:
          
     (i)  Fluctuations in exchange rates; and
          
     (ii) Transaction costs associated with the disposal of the
          Businesses.
     
(2)  Financial Reporting Standard 10 (FRS 10) requires that goodwill
     arising on acquisitions pre-1998 previously written-off to reserves be
     taken into account when calculating the profit/loss on disposal of a
     business. Accordingly, the pre-tax accounting profit/loss on sale to
     be reported within the Group's financial statements for the year ended
     31 December 2002 will be calculated after deducting acquired goodwill
     carried on the balance sheet of £44 million and, as required by 
     FRS 10, after the write back of goodwill previously written off to
     reserves of £300 million. The write back of goodwill previously
     written off to reserves does not affect shareholders' funds nor the
     incremental impact of the transaction on the net asset value per
     share.
     
(3)  In reporting the Group's six months results to 30 June 2002 Aviva
     disclosed aggregate net assets relating to the combined Australia and
     New Zealand general insurance operations of £370 million, equivalent
     to £353 million when translated at current exchange rates, including
     the value of acquired goodwill of £44 million.


Information on IAG

IAG is the largest Australian general insurance company with a market
capitalisation of A$3.8 billion (£1.3 billion). The group provides a range of
personal and commercial insurance products, primarily motor vehicle and home
insurance.

In February 2001, IAG acquired State Insurance, a general insurance subsidiary
of Aviva in New Zealand, for £125 million.



Exchange rate information

The following exchange rates have been used to convert Australian dollar and
New Zealand dollar amounts into pounds sterling throughout this announcement:



                                                     Australia  New Zealand
                                                                           
                                                          A$:£        NZ$:£
                                                                           
Premiums and profits for the 6 months                                      
 ended 30 June 2002                                       2.71         3.25
                                                                           
Consideration for net assets of the Businesses                             
 and IAG's market capitalisation                                          
 (at current exchange rates)                              2.85         3.25
                                                                           



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