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Aviva Plc becomes latest insurer to pull out of India

British insurance giant Aviva Plc is planning to pull out of its Indian insurance joint venture as the company withdraws from less-profitable markets, Reuters reports.

Aviva is in the process of advisors to find a buyer for its 26% stake in Aviva Life, a joint venture with India’s Dabur Group.

The stake is valued at $500 million.

Aviva is considering various options, including the sale of its stake to Dabur Group if it fails to find a foreign insurer to buy it, one source told Reuters.

Aviva and Dabur Group have declined to comment.

Despite booming Life and General insurance sectors, their growth spurred-on by a rapidly expanding, well-to-do Middle Class, a number of international insurers have pulled out of India in recent times.
Earlier this year, Dutch giant ING exited its Life Insurance Joint Venture with Exide Industries and in 2012, US major New York Life divested from a similar venture.

India’s ruling Congress administration has pledged to increase foreign direct investment in the insurance sector to 49% as part of a slew of economic reforms designed to arrest the country’s sliding growth rate.

The nationalist main opposition Bharatiya Janatha Party (BJP) however, opposes the move and wants FDI in the sector capped at the current 26%.

Analysts say that with a BJP victory all-but-assured at the 2014 general election, foreign players in the insurance as well as the pension fund sector are becoming weary, particularly given that the business model requires significant capital investment which in turn can only be guaranteed by making investors significant stakeholders.

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