Aviva shortlists Prudential, Manulife for Malaysia sale

SINGAPORE/HONG KONG,  (Reuters): Prudential Plc and Manulife are among four potential buyers that have made it through to a second stage of bidding for Aviva’s insurance business in Malaysia in a deal worth about $500 million, 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 percent 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 percent 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 percent of new premium sales in Asia come from bancassurance, compared with historical rates of as high as 70 to 80 percent in France and Spain.

Steve Kean, director of products, distribution and markets at risk management consultancy Towers Watson, said there is potential for bancassurance distribution to increase its share of new premium sales in some Asian countries.

“This channel has upside in Southeast Asia and across Asia. The challenge as ever is implementing it,” Kean said.

“Malaysia is a market where there is some significant potential for bancassurance in the right relationship. CIMB should be quite well placed to get different results than they are experiencing,” Kean added.

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.

Aviva shares were up 0.5 percent in early London trading, while AIA was down 2.7 percent. CIMB rose 0.3 percent.

Global insurance companies are lured to Southeast 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 $7 billion 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.

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.

Aviva paid 500 million ringgit ($164 million) for its 49 percent stake in the venture, which made a net profit of 31.8 million ringgit last year. Net premiums that it underwrote dropped about 30 percent to 230 million ringgit.