Aviva to sell its general insurance businesses in Asia to Mitsui Sumitomo Insurance
- Aviva to sell its general insurance businesses in Asia to Mitsui Sumitomo Insurance
- Total cash consideration of £249 million (US$450 million)
Following a strategic review of its businesses in Asia, Aviva plc ("Aviva") is to focus on its long-term savings businesses in the region. Aviva therefore announces that it has entered into an agreement to sell its general insurance operations in Asia (the "Businesses") to Mitsui Sumitomo Insurance Co Ltd ("MSI"), the second largest general insurer in Japan, for £249 million (US$450 million) in cash.
Aviva will retain and develop its long-term savings operations in the region, which 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. These comprise 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 transaction will be achieved through share purchase of Aviva's interests in joint venture operations, business purchase and asset purchase in Singapore, and transfer of Aviva's general insurance branch operations in Hong Kong, Philippines, Marianas, Macau and Taiwan.
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%. 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. Had the sale of the Businesses been completed on December 31, 2003, it would have resulted in an estimated increase in Aviva's reported net asset value per share of 7 pence to 509 pence.
Richard Harvey, group chief executive, said: "This is an excellent deal for Aviva's shareholders. The price is equivalent to approximately 2% of our market capitalisation. In contrast, the Businesses account for 1.1% of Group operating profit."
"It is 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."
"We remain fully committed to 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."
James Matthews, head of investor relations +44 (0)20 7662 2137
Media in Asia:
Joyce Koh, brand and communications manager +65 6827 7543
Media outside Asia:
Hayley Stimpson, director of external affairs +44 (0)20 7662 7544
Rob Bailhache, Financial Dynamics +44 (0)20 7269 7200
Notes to editors:
Information on Aviva's general insurance businesses
Aviva has one of the largest general insurance networks in Asia with operations in Singapore, Hong Kong, Malaysia, Thailand, Indonesia, Philippines, Marianas, Macau, Brunei and Taiwan. It is also a leading provider of property and cargo insurance in the region. In addition, Aviva has bancassurance distribution networks in the region with leading regional banks, such as Development Bank of Singapore and Standard Chartered Bank. Aviva's businesses in Singapore, Hong Kong, Malaysia and Thailand accounted for over 96% of its gross written premiums in the region in 2003.
For the 12 months ended in December 31, 2003, total net written premiums from the Businesses were £133 million (US$218 million), COR of 91% and operating profit attributable (before tax) to Aviva of £21 million (US$35 million). The net written premiums and operating profit achieved accounted for 1.6% of Group general insurance net written premiums and 1.1% of Group operating profit before tax for the twelve months ended 31 December 2003 as well as for 0.6% of Group net assets as at 31 December 2003. The regional headquarters are in Singapore, with approximately 1,400 employees across the region as at 31 December 2003.
Information on long-term savings operations to be retained and developed in Asia
Aviva is retaining its long-term savings businesses in Asia. These include:
- Singapore: Aviva entered the Singapore life market in July 2001 through the acquisition of the former Insurance Corporation of Singapore. Since then the company has grown to be the third largest provider of long-term regular savings products. Aviva Singapore's successful bancassurance partnership with DBS Bank commands more than a 50% market share of the regular savings bancassurance market. It is also a market leader in both the third party advisory firms market and employee benefits and healthcare segments.
- Hong Kong: Aviva Hong Kong started operation in July 2002. The company has a strategic partnership with DBS Bank which is the main distribution channel and has achieved significant growth in the last two years.
- India: Trading as Aviva Life Insurance, Aviva's Indian operation is a joint venture with the Dabur Group, one of India's oldest and well-respected business houses. Since its establishment in June 2002, Aviva has pioneered bancassurance via arrangements with four leading private and nationalized banks in India – Lakshmi Vilas Bank (220 branches with a 2 million customer base), Canara Bank (2,450 branches with 27 million customers), ABN AMRO Bank and American Express Bank
- China: Aviva set up its life insurance business in Guangzhou, China in January 2003 through forming a joint venture partnership with China Oils and Foodstuff Co. (COFCO). Aviva has also recently received licences to open branches in Beijing and Chengdu later this month. Aviva and Bank of China recently agreed to offer bancassurance in the Guangdong Province
Financial effects of the transaction
1. Subject to completion, the increase in net asset value per share related to the sale of the Businesses to be reported in the Group's financial statements for the year ended 31 December 2004 will differ from the estimated 7 pence per share stated above.
This will reflect:
(i) Fluctuations in exchange rates; and
(ii) Transaction costs associated with the disposal of the Businesses.
2. Financial Reporting Standard 10 (FRS 10) requires that goodwill arising on acquisitions be taken into account when calculating the profit/loss on disposal of a business. Accordingly, the pre-tax accounting profit/loss on sale to be reported within the Group's financial statements for the year ended 31 December 2003 will be calculated after deducting acquired goodwill carried on the balance sheet of £7 million.
Information on Mitsui Sumitomo Insurance Co Ltd
Mitsui Sumitomo Insurance Co Ltd ("MSI") is a leading general insurer in Japan with a market capitalisation of JPY1,677 billion (US$15.2 billion). MSI provides a wide range of property and casualty insurance products, primarily offering cargo, marine and transportation, motor, fire, medical and personal accidents insurance.
MSI has built an extensive regional footprint with operations in SouthEast Asia, Hong Kong, China and South Korea.