Tuesday July 10, 2012
Four Aviva suitors enter second stage of bidding
SINGAPORE: Four potential buyers, including Prudential Plc and Manulife, have made it through to a second stage of bidding for Aviva's insurance business in Malaysia in a deal worth about US$500mil, sources said.
The hunt for the Aviva stake underscores the industry's focus on growth opportunities in emerging Asian markets, where life insurance premiums are forecast to double the world average next year, according to a Swiss Re forecast.
AIA Group Ltd and Sun Life Financial Inc have also been short-listed in an auction process that attracted about 10 suitors in the first round, the sources added, who declined to be identified as the discussions were private.
Britain's second-ranked insurer is selling its 49% stake in an insurance joint venture with Malaysia's second biggest lender CIMB Group Holdings Ltd as part of a global retreat.
The joint venture has struggled against rivals such as Great Eastern and Prudential, and a new partnership could re-shape the competitive landscape in Malaysia.
Potential buyers are attracted by CIMB's 320 branches across the country and the ability to sell insurance products to the bank's customers. Also, CIMB could sell a significant portion of its 51% stake, allowing a new owner to control the business.
AIA, Manulife, Prudential and Sun Life declined to comment. Aviva did not reply to an email seeking response.
Some analysts estimate between 45% and 50 % of all new insurance products in Asia are sold through the so-called bancassurance agreements, compared to between 70% and 80% in France and Spain. Bancassurance deals are expected to drive insurance sales in Asia, which is encouraging global insurers to tap into bank distribution deals in the region.
Global insurance companies are lured to South-East Asia due to the region's rapid economic growth and low insurance penetration. Earlier this month, Prudential and Manulife opened offices in Cambodia.
Aviva's planned sale is among a slew of insurance deals keeping bankers in the Asia-Pacific region busy in an otherwise slack year for M&A.
Final bids for ING's US$7bil Asia life insurance and asset management business are due by the middle of this month, and Thailand's Thanachart Bank is selling its life insurance business, which has drawn interest from suitors including Prudential.
While insurers with sub-scale operations are finding it hard to gain market share and improve profitability, those with strong capital are jostling to bolster their position.
CIMB formed the joint venture with Aviva in June 2007, but the business has failed to perform to its potential, analysts say.
They cite the example of Maybank's joint venture with Allianz, which has fared better in terms of premium income compared to the CIMB-Aviva joint venture.
Binding bids for the Aviva sale are due by the end of this month, and management presentations are set to start next week, the sources said. - Reuters