Sunday, September 23, 2012

NDB Bank to exit insurance business

 
AIA likely to buy NDB’s stake as well

NDB Bank is likely to exit Aviva NDB Insurance by selling its stake to American International Assurance (AIA) following the planned exit of its partner British insurer Aviva who has already finalized its deal with AIA.

The insurance sources said that a team of officials from the Hong Kong based AIA was in Colombo last week negotiating with the NDB Bank for the purchase of nearly 42% stake in Aviva NDB Insurance held by the bank.

Aviva who has a majority stake of 51% in the local insurance company is believed to have already entered into an MoU for the sale of its stake to AIA. It is not clear whether the NDB Bank has entered into an agreement for the sale of its stake to AIA.

However well informed sources said that the general policy of AIA has been to somehow acquire the entire shareholding wherever they acquired insurance business with the exception of their operations in India where there is a restriction on foreign companies controlling insurance business.

Accordingly, in the event the sale goes through the price the NDB Bank would be getting for its stake is likely to be a staggering sum far above the current market value which is around US$ 15 million.

The market analysts said that according to the owning structure of Aviva NDB where some of the stake holders which are NDB subsidiaries are not listed, question of a mandatory offer may not arise.

The NDB Bank through its subsidiary Capital Development and Investment Company (CDIC) controls a stake of 41.6% in Aviva NDN Finance Lanka (ANFL) while Aviva Asia Holdings owns majority stake of 58.4%. ANFL in turn has a stake of 87.3% of Aviva NDB Insurance while NDB Bank independently has another stake of 5% in Aviva NDB Insurance. However if AIA acquires stakes owned by both Aviva and NDB Bank it will end up owning more than 90% of the insurance company. Depending on the company policy AIA may offer to buy the remaining float as well.

Since inception in 1987, Eagle Insurance has been a major player in Sri Lanka’s insurance market.

The company began operations as a subsidiary of Ceylon Tobacco Company (CTC) with technical collaboration from Eagle Star, UK.

When CTC divested its financial services business in 1999 Eagle become a member of the global insurer, Zurich Financial Services Group while National Development Bank (NDB) became the Company’s major local shareholder.

Zurich withdrew its operations from Sri Lanka in 2003 leaving NDB the majority control of Eagle with Bank of Ceylon being a key shareholder. In 2006.Eagle became an Aviva Company. Today, Aviva and NDB, the major shareholders of AVIVA NDB Insurance have 51% indirect and 41.2% effective shareholding respectively.- GA

source - www.nation.lk

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