UK-based Aviva writes off £24-million goodwill in India operations

MUMBAI: Aviva has written off goodwill in its Indian operations after it fired a few top fund managers for procedural lapses. The company at the same time is also raising its stake in the local joint venture to 49% before selling off completely.

The UK-based insurer said that the management has determined that the goodwill in Aviva Life Insurance Company India is fully impaired.

"An impairment of £24 million (2013: £29 million) has been recognised in respect of this associate, reducing its goodwill to nil,” the company said in its annual report.

In response to an email query, the company said: “Goodwill is a balance sheet entry. The net value reported this year is a result of accumulated entries. This has nothing to do with Aviva Plc’s outlook for the future of Aviva India operations.”

A month back, three fund managers had quit after Aviva India identified certain variances to their standard operating procedures related to investment operations.

It said that as a responsible and listed corporate, Aviva carries out periodic reviews of its tangible and intangible assets, including goodwill.

Recently, Aviva announced its intent to raise stake in its Indian joint venture after new law allowed higher foreign shareholding in insurance. Aviva holds 26% of Aviva India, a joint venture in which Dabur Invest Corporation holds the rest.

"If you look at the future potential, it is bright and if any player looking to stay committed to India and the business, they will raise stake in the company to 49%,” said Shaswat Sharma, partner at KPMG. "But we do not know what the existing book looks like and what is in the annual report.”

A couple of years ago, the company had decided to sell its stake in the Indian venture.

Aviva’s paid-up capital in the joint venture is around Rs 2,005 crore. Aviva India had seen a 6.14% year-on-year decline in new business premium income to Rs 557 crore in last fiscal year. It is at No. 14 in the ranking table based on new business premium collection among India’s private sector insurance companies.
Aviva India sells insurance policies through IndusInd Bank, RBS and Punjab & Sind Bank as well as more than 30 cooperative banks and regional rural banks. It has 134 branches.