UK insurance group Aviva is preparing to sell its Irish health insurance business, which has about 300,000 customers.
The company has appointed Macquarie to advise it on its strategic options for the business, which is a 70/30 joint venture with AIB.
No comment was available from Aviva or AIB but it is understood that the process is at an early stage and no bids have yet been received for a business that has experienced reduced profitability in the past couple of years.
In 2014, Aviva Health had gross written premium of €330 million but profits declined by 34 per cent to €12 million. In the first half of this year, its profits reduced to €2.6 million from €5.1 million a year earlier, which was described as better than anticipated due to effective management of expenses and claims.
However, it is understood that its profitability has recovered in the second half of the year and could mirror the outturn of 2014.
It is not clear how much the business might be worth but industry sources suggested it could be between €50 million and €100 million.
Aviva employs 120 staff in its health insurance unit here and they were informed of its plans on Thursday.
Third insurer
Aviva is the third biggest health insurer in Ireland, having entered the market in 2008 with the purchase of a 70 per cent stake in Vivas Group, with AIB retaining ownership of the balance.
It ranks behind State-owned VHI and Laya Healthcare, which is owned by US financial giant AIG. The other player in the market is Glo Health, which is 49 per cent owned by Irish Life.
About half of its health business is generated from intermediaries and Aviva has outsourced the customer services and claims functions to Abtran in Cork.
It is understood that Aviva remains committed to its general insurance and life businesses in Ireland having restructured them significantly in recent years.
But it appears to have decided that in the case of its health business, its capital could be better deployed elsewhere. Significantly, Aviva’s Irish general and life businesses are regulated in the UK for prudential and capital purposes but the health division is fully regulated here.
At the time of the publication of the half-year results, Aviva Ireland's chief executive Hugh Hessing said its health business had been hit by an increase in claims costs and in claims frequency.
“At the same time, average premium has fallen as customers opt for lower priced plans at renewal,” he added.
At group level, Aviva Ireland posted an 80 per cent increase in its operating profits to €45 million in the first six months of this year.
