Aviva adds South Korea, Sri Lanka to Asia exit list: Sources

HONG KONG (Reuters)—British insurer Aviva P.L.C. is putting its South Korean and Sri Lankan businesses on the auction block, sources with knowledge of the matter said Thursday, as part of a wider retreat from sub-scale Asian markets in a deal that could fetch around $150 million.

Britain's second-biggest insurer laid out plans last week to sell underperforming businesses globally, a strategy aimed in part at raising money to protect against its euro zone exposure, which is bigger than that of its rivals.

The company's move also illustrates a trend among struggling European financial institutions to exit non-core operations and focus on their home markets.

Aviva has come under fire for its eurozone exposure and a share price that has plunged 38% in the past year. Irate shareholders forced Chief Executive Andrew Moss to quit earlier this month after determining his pay was out of line with the company's flagging performance.

Aviva did not specify the countries it would exit in its announcement last week. Aviva's South Korean investment in 2008 and its stake in the Sri Lankan company give it a combined value of about $66 million, and some estimate the deal would be worth about $150 million.

The sources were not authorized to speak to the media. Aviva was not immediately available for comment.

The London-listed insurer needs to shore up its capital base in light of its exposure to the troubled eurozone. Aviva, which generated 40% of its operating profit in mainland Europe last year, has been hit harder than its main British rivals by the eurozone's woes.

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Aviva has operations in 10 Asian countries, mostly joint ventures. Its Asia-Pacific operations accounted for 2% of its 2011 group operating profit.

The company entered the South Korean market in 2008, when it formed a consortium with Woori Financial Holdings Co. to buy LIG Insurance Co. Ltd. for £73 million ($115.3 million). Aviva holds a nearly 41% stake in the joint venture.

Aviva has held informal talks with Woori to sell its stake in the venture to the South Korean partner, and Woori is still reviewing the proposal, one of the sources said.

Woori declined comment.

In Sri Lanka, Aviva NDB Insurance generated 12.8 billion Sri Lanka rupees ($99 million) in revenue last year and earned a post-tax profit of 691.6 million Sri Lankan rupees.

The company had a market value of $36 million based on Wednesday's close, which would give Aviva's 51% stake a valuation of $18 million.

Aviva, along with other insurers, is under pressure from the Sri Lankan regulator to separate its business into life and nonlife businesses, one of the sources said. The source said that AIA Group Ltd., Prudential P.L.C. and Manulife Financial Corp. would be the most likely bidders for Aviva's stake in the Sri Lankan joint venture.

Aviva is also in the process of exiting its Malaysian joint venture with CIMB and has hired Morgan Stanley to run the sale process, sources previously told Reuters.

That sale process is expected to kick off soon, and CIMB has drawn up a list of six insurers it would like to partner with, one of the sources said.

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Aviva, which has also long been exploring the sale of its loss-making Taiwan business, has identified China and India among its core markets in Asia. It is also exploring the sale of its American operations, estimated to the worth £1 billion ($1.6 billion).

Aviva's retreat from Asia is part of a broader move by struggling European financial institutions that are pulling out of the region to focus more on their businesses at home. Earlier this year, British lender Royal Bank of Scotland P.L.C. sold part of its investment banking operations to CIMB, while ING Group N.V. is in the process of selling its Asian life insurance and asset management business.

While weaker insurers are exiting the region, those with stronger positions such as AIA and Prudential, are aiming to consolidate their positions in various Asian markets.