Says timing is perfect as post-war rebounding Sri Lanka offers high growth opportunity; AIA’s first acquisition in two years after rigorous assessment
Enters into 20-year bancassurance deal with NDB
Marking the biggest industry transaction in Sri Lanka, Asian giant AIA Group yesterday sealed a deal to invest $ 109 million to acquire a 92.3% stake in Aviva NDB Insurance, giving both the company and the country a mega boost.
It was the first acquisition for AIA since its record breaking $ 17.8 billion IPO in October 2010, through which global giant AIG sold a 58% stake. Market leader in Life business in six of the 15 markets it operates in Asia, AIA said Sri Lanka was chosen given its huge potential after considering between 30-40 opportunities in Asia including mergers and acquisitions.
AIA listed the post-war rebound in the country as well as the low penetration of insurance as key considerations.
The stake in Aviva NDB Insurance was acquired via Aviva NDB Holdings Lanka Ltd., the joint venture between British insurer Aviva and NDB.
Once the regulatory approvals are obtained, Aviva NDB will be rebranded as AIA Sri Lanka, whilst it will enter into a 20-year bancassurance deal with NDB.
AIA is confident it will get the bancassurance model right in Sri Lanka and use it as a growth driver, given its success in select Asian markets where bancassurance accounts for as high as 60% of its overall business.
As part of the deal, AIA has also agreed to sell to NDB the 83.9% stake in NDB Aviva Wealth Management Ltd. (NAWM), which will be acquired by NDB Group.
The remaining 7.7% 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,” a statement by the insurance company said.
It said the acquisition reflects the quality of the Sri Lanka business, operations, and management, and its position of strength in the Sri Lankan market. Customers will benefit from the strength, security and certainty associated from being part of the AIA Group, which is the fifth largest insurance company in the world by market capitalisation.
AIA’s Group Chief Executive and President Mark Tucker in a statement 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.”
AVIVA NDB Insurance Managing Director Shah Rouf said: “Our company has progressively been getting stronger, to the point where we are now the second largest life insurer in Sri Lanka. Becoming part of AIA is a fulfilment of our own vision to be the premier insurance company in Sri Lanka.”
Aviva Group Chief Executive of Higher Growth Markets Simon Machell commented: “The sale price reflects 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.”
NDB Group CEO 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.”
Established in 1987, Aviva NDB Insurance has a composite insurance license and is Sri Lanka’s second largest Life insurer with 800 employees and a high-quality tied agency force of 3,100 agents. In the year ended 31 December 2011, Aviva NDB Insurance recorded gross written premiums of US$ 81 million with Life premiums accounting for approximately 75 per cent and Non-Life premiums 25 per cent of the total premiums.
Aviva NDB Insurance is listed on the CSE under the stock code ‘CTCE: N0000’.
AIA Group Limited and its subsidiaries (collectively ‘AIA’ or ‘the Group’) comprise the largest independent publicly listed pan-Asian Life insurance group. It has wholly-owned main operating subsidiaries or branches in 14 markets in Asia Pacific – Hong Kong, Thailand, Singapore, Malaysia, China, Korea, the Philippines, Australia, Indonesia, Taiwan, Vietnam, New Zealand, Macau and Brunei and a 26 per cent joint venture shareholding in India.
The business that is now AIA was first established in Shanghai over 90 years ago. It is a market leader in the Asia Pacific region (ex-Japan) based on Life insurance premiums and holds leading positions across the majority of its markets. It had total assets of US$ 119,494 million as of 31 May 2012.
AIA Group Limited is listed on the Main Board of the Stock Exchange of Hong Kong Limited under the stock code ‘1299’ with American Depositary Receipts (Level 1) traded on the over-the-counter market (ticker symbol: ‘AAGIY’).