* Aviva exploring sale option for Australian business
* Sale could fetch up to A$1 billion
* AXA Asia Pacific and AMP seen potential buyers
* Aviva shrs rise 6.1 pct in morning, broad mkt up 0.8 pct
(Adds quotes, names of potential buyers, stock price, bylines)
By Denny Thomas and Victoria Howley
SYDNEY/LONDON, May 6 British insurer Aviva plc
(AV.L) is exploring selling its Australian business, which is
valued at up to A$1 billion ($735 million), sources with direct
knowledge of the process told Reuters.
Aviva's advisers, Morgan Stanley (MS.N) and JP Morgan
(JPM.N) have set May 8 as the deadline to submit indicative
bids, with final bids due in early June, the sources added.
Aviva declined to comment and so did Morgan Stanley and JP
Morgan. Aviva shares were up 6.1 percent in London on Wednesday
morning, outpacing a 0.75 percent rise in the FTSE 100 index
A sale could help Aviva to further alleviate concerns about
its capital position, which has been a cause of concern for
some investors after the group left its 2008 dividend unchanged
in March. But Aviva last month bolstered its capital reserves
by a quarter, addressing some of those worries. [ID:nLR64522].
On Wednesday, Aviva outlined plans to return surplus funds
to customers, giving 90 percent of its one million eligible
policyholders a cash payment of between 200 pounds and 1,150
The proposed retreat from Australia is part of a growing
trend of foreign financial institutions scaling back from the
nation to focus on their home markets. Last year, British
lender HBOS plc HBOS.L sold its Australian unit, BankWest, to
Commonwealth Bank of Australia Ltd (CBA.AX).
The Australian insurance market had endured turbulent times
in the last five to 10 years, Eamonn Flanagan, analyst with UK
stockbrokers Shore Capital said, adding that other UK insurers,
Prudential Plc (PRU.L) and Legal & General (LGEN.L), pulled out
of the market ahead of the turmoil.
"Having weathered the storm, it would be strange for Aviva
to sell now," he said.
AXA, AMP SEEN AS BUYERS
Aviva Australia consists of life insurance, wealth
management and minority stakes in some financial planning
business, which together earned about A$90 million in 2008, one
source who saw the sale document, said.
"I think, they have a marginal position in this market,
both in life and wealth management," said one banker, about
Aviva. "The parent has obviously made the decision that it's
not core to their business," the source added. The source
declined to be identified as the process was not public yet.
"It is fair to say it is a transaction that will make sense
to a lot of people," he added. He declined to say if he was
advising any likely buyers.
Potential buyers for the asset could include AXA Asia
Pacific Holdings Ltd AXA.AX and AMP Ltd (AMP.AX), banking
Both AXA and AMP declined to comment.
AXA, a unit of French insurer AXA SA (AXAF.PA), is sitting
on about A$1.1 billion in total assets above the minimum
required by the Australian regulator, the company told
shareholders on Wednesday.
"I am sure, AXA will be in the mix. If it makes half sense
to anyone, it's got to be them," the second source said. He
declined to be identified as the sale process was not public.
The source also declined to say if he was advising any
"But they need to convince their French parent to stump
up," he added. An AXA spokeswoman declined to comment.
While most Australian banks are likely to have a look at
the assets, not many are seen as keen bidders as they are
fighting their own bad-debt battles.
"I am not sure if any of the major banks are really focused
on stepping up on life insurance right now, given all the
issues they have got. Every time they look under a rock, there
is another bad debt waiting for them," the second banker said.
"Staying alive is their top priority," he added.
Westpac Banking Corp (WBC.AX) chief executive Gail Kelly
said on Wednesday the lender was focused on integrating last
year's acquisition of St George Bank, when asked if the group
would look at acquisitions. Westpac reported a weaker
first-half profit after its bad-debt charges tripled.
(Editing by Muralikumar Anantharaman)