The U.K.’s Aviva (ex-CGNU) has agreed to sell its Asian non-life business to Japan’s second largest general insurer (after Tokio Marine) Mitsui Sumitomo Insurance Co Ltd. (MSI), for £249 million ($443 million).
The move is in line with the British insurer’s announced strategy of concentrating on its life, pension and financial services operations. A press bulletin said the company had made the decision after conducting “a strategic review of its businesses in Asia,” and had decided to “to focus on its long-term savings businesses in the region.” These will continue to operate under the Aviva brand and have “a separate management team, platform and distribution networks to the Businesses.”
Under the terms of the agreement, MSI will acquire all of Aviva’s general insurance businesses in Asia. The various operating companies to be acquired include: “the general insurance business of Aviva Limited and the general insurance assets of Aviva Asia Pte Ltd in Singapore; Aviva Insurance Berhad in Malaysia (including its branch in Brunei); Aviva Insurance (Thai) Co Ltd in Thailand; P.T. Aviva Insurance in Indonesia; Dah Sing General Insurance Co Ltd in Hong Kong; and Aviva’s branch operations in Hong Kong, the Philippines, Marianas, Macau and Taiwan.”
The announcement noted that “In the twelve months ended 31 December 2003, the Businesses reported gross premiums written of £173 million (US$283 million), operating profit attributable to Aviva before tax of £21 million (US$35 million) and a combined operating ratio 91 percent. As at 31 December 2003, the Businesses had net assets of £44 million (US$79 million) (based on 31 December 2003 exchange rates) and a letter of credit in relation to Hong Kong of £27 million (US$48 million) for which MSI will make its own arrangements on completion.
“The sale is expected to complete in a number of territories by the end of 2004, with the remaining following thereafter. It is subject to the regulatory process and approval by the other shareholders of the Businesses.”
Upon completion of the acquisitions, MSI will become the largest P/C insurer in the growing Southeast Asian sector. The company has been seeking ways to expand its operations outside of Japan’s mature and highly competitive market.
Aviva’s Group CEO Richard Harvey commented: “This is an excellent deal for Aviva’s shareholders. The price is equivalent to approximately 2 percent of our market capitalisation. In contrast, the Businesses account for 1.1 percent of Group operating profit.”
He added that it was also a “very good deal for staff. MSI is committed to maintaining the existing operating structure and will run the Businesses as a separate division, complementing its current focus on Japanese customers in the region.”
Harvey confirmed that the company would now be concentrating on “further developing our long-term savings business in the region. We have established a strong platform in Singapore and Hong Kong and have developed businesses in the emerging and rapidly growing life insurance and long-term savings markets in India and China. We will continue to increase our focus and resources into the region, which represents a significant long-term growth opportunity for us.”
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