CIMB Aviva Suitors To Be Accepted This Week

CIMB Group and UK-based Aviva Plc will finalise the buyers of their 51 per cent and 49 per cent stakes respectively in CIMB Aviva Assurance Bhd before the end of this week, according to people with knowledge of the deal.

CIMB is selling its entire controlling stake in the insurance unit to Khazanah Nasional Bhd for US$500 million (RM1.53 billion), they added.

However, it was learnt that both parties could not agree whether Manulife Financial Corp or Sun Life Financial Inc should buy Aviva's stake.

This disagreement has dragged the deal for almost three months.

“The deal was delayed not because of pricing issue. Both Manulife and Sunlife made the same bid,” one of the sources told Business Times.

In 2007, when Aviva paid RM500 million for its 49 per cent stake in the joint venture, it included a long-term bancassurance agreement with CIMB.

However, the joint venture has struggled against some of its rivals.

It is understood that CIMB prefers Aviva to sell to SunLife as it has an existing joint-venture life insurance company in Indonesia with the latter.

PT CIMB Sun Life is a joint-venture company formed in 2009 between CIMB Group, CIMB Niaga and Sun Life Financial.

PT CIMB Sun Life has a bancassurance agreement with CIMB Niaga for the distribution of life insurance products through the latter's network of branches and direct channels in Indonesia.

CIMB is on a regional expansion programme and has become one of the top regional banking groups in the region with an impressive network.

Hence, it wants a strong bancassurance partner and sees the segment as one of its focused areas because it generates higher fee income.

For the winning bidder, the strategic alliance will allow the winner to distribute bancassurance products through CIMB Group's subsidiaries across the region.

CIMB Group is in nine out of 10 Asean nations - Malaysia, Indonesia, Thailand, Singapore, the Philippines, Cambodia, Brunei, Vietnam and Myanmar.

The banking group also wants to raise its overseas revenue contribution to 60 per cent by 2015.

Apart from securing a long-term and multinational bancassurance deal, the added sweetener for the winning bidder is gaining an automatic takaful licence here.

“It is the icing on the cake over the longer term,” said the source.

Malaysia is one of the world's most developed countries for takaful products and Islamic finance in general, with the potential growth of takaful business representing almost 50 per cent of the total insurance premiums in Malaysia by 2015.

Growth of the takaful industry was phenomenal in the past several years. Its new business family contributions have grown by 20.2 per cent per annum on a compounded annual growth rate (CAGR) basis between 2003-2011, compared with a CAGR of 6.3 per cent per annum for conventional new business premiums.

CIMB and Aviva sell takaful products via CIMB Aviva Takaful.

The CIMB Aviva joint venture sale has generated interest from global insurers keen to tap growth prospects in Southeast Asia.

Life insurance premiums are growing fast in the region boosted by a booming middle class.

Other suitors that had shown interest were Prudential plc, AIA and German insurance giant Allianz.

Business Times reported recently that the sale of the joint venture is imminent after learning that Aviva plc has moved Yen Saw, the chief executive officer of CIMB Aviva Assurance Bhd, to Indonesia.

- Btimes