Aviva to sell its Asian firms amid eurozone woes

Aviva is to sell its Sri Lankan and South Korean businesses, according to reports today.

Aviva’s South Korean investment in 2008 and the value of its stake in the Sri Lankan company has a combined value of about $66 million and some estimate the deal would fetch about $150 million, according to Reuters.

The news of the sale comes in the wake of executive deputy chairman John McFarlane admitting the firms needs to “build its capital base”.

Aviva’s share price is at a three-year low as the insurer is under pressure from the troubles in the eurozone and the potential exit of Greece is at the forefront of investor concern.

It has an estimated £9.2bn in Italian government exposure, although the policyholder bears all the risk.

Aviva has also expanded across Europe in recent years, and now sales in the recession-hit countries such as Spain and Italy are plummeting.

Aviva still maintains a top-tier financial strength rating with the agencies, even so, there is concern at board level over its capital strength, espeically if the eurozone’s troubles deepen.

Aviva’s EU Insurance Groups Directive solvency surplus finished the first quarter at £3.2bn, compared to £2.2bn from year-end 2011, but McFarlane has adopted a “better be safe than sorry” philosophy and is selling firms.

RAC was sold for £1bn in 2010 to help buttress capital and now the US life business is up for grabs.

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