AIA sizes up bid for $6 billion ING Asia insurance unit: sources

HONG KONG (Reuters) - AIA Group Ltd <1299.HK>, Asia's No.3 insurer and about one third owned by American International Group Inc , is considering bidding for Dutch ING's around $6 billion Asian insurance operations, sources said, with the prospective sale expected to draw heavy interest from rivals.

AIA, which was the crown jewel in bailed-out insurer AIG's global business, has invited four banks to pitch for advisory roles for a possible offer, two sources familiar with the process told Reuters. The sources declined to be identified as they were not authorized to speak to the media.

An AIA spokeswoman declined comment.

Last week, ING scrapped plans to list its combined Asian and European insurance and investment management businesses, saying it would consider other options as it had received strong interest for its Asian operations.

ING has hired Goldman Sachs and J.P. Morgan to advise on the sale, sources told Reuters.

"I can't comment on process. All I can say is that we are exploring all options for the Asian insurance and investment management business," ING spokeswoman Victorina de Boer said.

The prospective sale by the Dutch bancassurer comes as European banks look to offload assets and repair balance sheets battered by the sovereign debt crisis.

Japan's Sumitomo Mitsui Financial Group (SMFG) <8316.T> and Sumitomo Corp <8053.T> said earlier they would buy Royal Bank of Scotland's aircraft leasing business in a deal worth $7.3 billion.

AIA, led by former Prudential Plc CEO Mark Tucker, is a surprise leader in chasing the ING business, some analysts said, as most of AIA's business is generated from fast growing Asian markets, while more than three quarters of ING's new sales are in the maturer South Korean and Japanese markets.

As in any auction, AIA may decide to pursue or back away from the process, the sources said.

Analysts estimate AIA - which was floated in a $20.5 billion Hong Kong IPO in 2010 - has about $3 billion in excess capital over regulatory requirements, and would have no problem raising funds if it did go ahead with a complete takeover of ING's Asian insurance business.

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Given the global market downturn and the dominance of South Korea and Japan in ING's Asian insurance portfolio, the sale process could see potential bidders teaming up, making joint bids that would later allow them to extract just the businesses complimentary to their existing Asia operations.

Domestic insurers could scoop up assets in places such as South Korea.

"If you break it up, you potentially open yourself to a lot more potential buyers. It becomes a lot more onerous to sell it bit by bit, but you potentially open yourself to smaller local players," said Barclays insurance analyst Mark Kellock.

ING operates in seven Asian countries, but its businesses in South Korea and Japan are its biggest. In the first three quarters of last year, ING Life Korea accounted for about 43 percent of ING's Asia gross premiums and some 39 percent of underlying profit.

"Since Korea is such a big part of ING's Asia business, the Korea domestic players may hold the key," said a source who advises financial institutions and who asked not to be named as he is not authorized to talk to the media.

ING has an existing life insurance joint venture with South Korea's KB Financial Group <105560.KS>, KB Life Insurance.

KB Financial would be interested if ING were to sell the Korean business separately, but wouldn't go for the whole Asian business, said one Seoul-based banking source who did not want to be identified given the sensitivity of the issue.

Canada-listed Manulife and at least two Japanese companies are other potential suitors, sources familiar with the process have said.

The Japanese insurers are not interested in entering the Korean market or increasing their Japanese exposure, so would be interested only in the Southeast Asia businesses, they added.

The sources were not authorized to speak about the matter publicly.

Manulife declined to comment, though CEO Donald Guloien said in September the insurer would be on the lookout for acquisition opportunities, particularly in Asia, if hard-hit European financials sell off assets.

AIA shares gained as much as 1.9 percent on Tuesday to their highest since January 6, while the benchmark Hang Seng share index <.HSI> was up 2.5 percent.

(Additional reporting by Ju-min Park in SEOUL, Cameron French in TORONTO, Myles Neligan in LONDON, and Gilbert Kreijger and Roberta Cowen in AMSTERDAM; Editing by Jonathan Hopfner and Ian Geoghegan)

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