HK insurer to buy Aviva shares

H.D.H Senewiratne

All stakes belonging to the British insurer Aviva in NDB – Aviva Insurance Plc will sell to a Hong Kong based insurance giant, theAmerican International Assurance (AIA) and exit the market, market sources said.

According to market sources, they have reached the final stages of negotiations for the purchase of 51% of the stake held by Aviva and bids have been approved. Therefore, the company had signed a Memorandum of Understanding (MoU) to go ahead with the transaction.

When the Daily News Business contacted Aviva Insurance, they declined to comment on it.

The NDB Bank through its subsidiary, the Capital Development and Investment Company (CDIC), controls a stake of 41.6 percent in Aviva NDB Finance Lanka (ANFL), while Aviva Asia Holdings owns the majority stake of 58.4 percent.

ANFL in turn, has a stake of 87.3 percent of Aviva NDB Insurance, while the NDB Bank independently has another stake of 5 percent. The company’s market value had been around Rs. 8.4 billion which would give Aviva’s a 51 percent stake, a valuation of Rs. 4.2 billion.

When bids had been called in July, seven parties had collected offer documents from Morgan Stanley in Hong Kong who was the investment bankers appointed to handle the deal, insurance sources said. Aviva NDB Insurance which is believed to be the second largest life insurer in Sri Lanka, generated Rs 12.8 million in revenue last year, earning a post-tax profit of Rs 691.6 million. With this development value of a share, which is likely to go up to a Rs 300 level at present, it is selling at Rs 240. AIA is a specialised insurance company mainly operating in Asian markets. With these developments, the share market would increase further, Lanka Securities (Pvt) Limited Research Analyst said. At the end, NDB directly and indirectly has about 41 percent of Aviva NDB Insurance, while Aviva Asia Holdings has about 51 percent. Now the question arises in the market circles whether the NDB will continue to hold their stakes or whether they would sell off their stakes as well to the buyer of the Aviva share.

It was also reported earlier, that the AIA Group, Prudential Plc and Manulife Financial Corp, were bidders for Aviva’s stake in the Sri

Lankan joint venture. However, some news sources said that a few local parties such as top business man Harry Jayewardene and the Janashakthi Group were also interested in it. But This is as part of Aviva, Britain’s second largest insurer’s announcement earlier to sell underperforming businesses globally, partly to raise money to protect against its euro zone exposure which is bigger than that of its rivals. Reuters news wire reported earlier.