Aviva may exit insurance JV with Dabur

Aviva life InsuranceAviva Plc, one of the UK's largest insurance group, is planning to exit its Indian insurance joint venture with Dabur India Ltd, valued at more than $500 million, people familiar with the matter said.

According to Aviva India's filings with the regulator, the company has a paid-up capital of Rs2,005 crore as on 31 March 2013.

Profit at Aviva's India unit fell by more than half in the financial year ended March 31, 2013 to about Rs320 million, while total premium income dropped roughly 12 per cent, according to company filings.

Aviva Plc has slashed its dividend and scrapped bonuses for executive directors as the company reported a net loss of £3.1 billion ($4.6 billion) for 2012, primarily on account of a £3.3 billion write down related to disposal of its US business. (See: Aviva posts £3.1-bn loss on write-downs; cuts dividend).

In December 2012, Aviva agreed to sell its US life unit for $1.1 billion to a division of  Leon Black's Apollo Global Management LLC to increase its financial strength. (See: British insurer Aviva sells US unit for £1.1 bn).

Aviva too, like other foreign insurers, entered the Indian market after the government allowed the entry of  foreign investment in the insurance sector, though Life Insurance Corp of India, with a 75-per cent market share overshadowed all the foreign firms put together.

Insurers have also been hurt by a curb on the sale of profitable equity-linked insurance plans.

Aviva would be the third foreign insurer to quit India since 2012. In 2012, New York Life exited its life insurance joint venture with Max India, and in January 2013 ING sold its stake in its insurance JV to Indian partner Exide Batteries.

However, Exide could still not find a buyer for its stake, while Max  sold its stake to Japanese insurer Mitsui Sumitomo.

The insurer is considering various options, including selling its stake to Dabur group if it fails to find a foreign buyer, one of the sources said.

Aviva's vision was to be among India's leading life insurers, focused on sustainable growth. However, it is now pulling out without assigning any reason. According to experts the mounting losses may have prompted the UK insurance giant to shut down its Indian operations.

Life insurance penetration in India is about 3.4 per cent of the gross domestic product in terms of total premiums underwritten in a year, much lower than 8.8 per cent in Japan and 8.7 per cent in Britain.