Aviva, NDB exit insurance
* Right time to enter Lanka, says Asian insurance giant after having explored 45 options to gain a foot hold in the post-conflict economy
* Will not purchase any more Aviva NDB shares; no mandatory offer
* Ready to take on highly competitive insurance industry
By Mario Andree
Asian insurance giant, Hong Kong listed American International Assurance Company Ltd (AIA) is entering Sri Lanka after a US$ 109 million acquisition and plans to invest more to make a mark in the highly competitive industry which is yet to realise its potential with only 10 percent of the population with insurance cover.
The AIA Group yesterday announced that it has agreed to acquire a 92.3% stake in Sri Lankan insurer, Aviva NDB Insurance, through Aviva NDB Holdings Lanka (Pvt.) Limited from British insurer Aviva and Sri Lanka’s National Development Bank (NDB).
In addition, Aviva NDB will enter into a 20 year bancassurance agreement with NDB, one of Sri Lanka’s largest financial conglomerates with a nationwide bank branch network.
AIA has also agreed to sell to NDB the 83.9 per cent stake in NDB Aviva Wealth Management Limited (NAWM) which will be acquired by NDB Group as part of the proposed transaction.
The remaining 7.7 per cent of Aviva NDB Insurance not acquired represents the shares publicly held and traded on the Colombo Stock Exchange of Sri Lanka (CSE) and no offer will be made for the remaining shares.
Total net consideration payable by AIA with respect to the transaction including the exclusive bancassurance agreement with NDB and the sale of the NAWM stake is US$109 million.
The conclusion of the transaction and the subsequent rebranding and renaming of AVIVA NDB as AIA is subject to necessary legal, statutory and regulatory approvals," AIA said in a statement.
Officials declined to comment on the purchase price of Aviva NDB Insurance.
AIA Group Limited Regional Chief Executive Huynh Thanh Phong yesterday told journalists that the company was bullish on Sri Lanka and was ready to invest further.
He said the tough completion in the industry was welcome and AIA’s presence would expand the share, and highlighted that only 10 percent of the local population was under any means of protection pointing out to the untapped potential for insurance industry here.
According to him it was the right time to enter the Sri Lankan market with its economic growth promising, and said the company was here for the long run.
He said AIA had evaluated more than 45 options during the last two years to enter the Sri Lankan market.
"The acquisition reflects the quality of the Sri Lanka business, operations and management, and its position of strength in the Sri Lankan market."
Mark Tucker, AIA’s Group Chief Executive and President, said, "We are delighted to be entering Sri Lanka, a country with a compelling combination of strong economic growth prospects and low existing levels of insurance penetration. This acquisition will immediately establish AIA as the second largest life insurance company in Sri Lanka.
"Aviva NDB Insurance, with its experienced management team, high quality employees and agents and an attractive long-term bancassurance relationship, represents an excellent platform from which to participate and grow in the highly attractive Sri Lankan market. We look forward to playing a leading role in the development of Sri Lanka’s insurance sector as we meet the long-term savings and protection needs of increasing numbers of Sri Lankan individuals and families."
Simon Machell, Chief Executive of Higher Growth Markets, Aviva Group commented, "The sale price reflect$ the relative success and growth of the AVIVA NDB business. We take great pride in having developed a robust market leading insurer that will continue to play an important role in the emerging Sri Lankan economy".
CEO of NDB Group, Russell De Mel stated, "We are very pleased to have been part of the growth of AVIVA NDB Insurance and the entry of the insurance giant AIA will further strengthen the Company. Insurance, the third pillar of the NDB Group, will continue to exist through an even stronger alliance in bancassurance that we will have with AIA. This transaction also gives an opportunity for the NDB Group to further strengthen its strategic alliances within the financial services sector whilst enhancing and releasing core capital; a prerequisite to boost organic and inorganic growth of the NDB Group. It is a timely opportunity to become a significant national and regional player in the financial sector and contribute further to the growth of Sri Lanka."
source - www.island.lk
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