Harry J to spread insurance wings?

7 April 2011 05:59 am - 0 - {{hitsCtrl.values.hits}}

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The latest guesswork of analyst revolving the ‘cash in hand’ situation of Harry Jayawardena owned Distilleries Company Plc has indicated that the business tycoon is in the look out to acquire an insurance company, Mirror Business learns.

According to market analysts, the speculation is rife that Harry J is actively pursuing an insurance buyout.
This is speculated in the backdrop of UK insurer Aviva Plc considering to trim down its less profitable overseas operations, in an effort to boost overall group profitability.

“One thing he has to decide is whether to push forward his newly established Continental Insurance or to acquire the control of an insurance company from the market,” an analyst on the ground of anonymity said.

In November, Aviva Group said it would remain in countries where Aviva’s operations provide at least $100 million in profit and gives a minimum 12% return on capital, or are valued at a minimum of $1 billion.

The company also said it will increase its focus and depth in the 12 markets that include, U.K., France, Ireland, Italy, Poland, Spain, Russia, Turkey, Canada, the U.S., China and India. Together, these 12 markets provide 80% of Aviva’s profit from Life and General insurance operations.

Aviva is present in 30 countries and it entered Sri Lanka in 2006 partnering with National Development Bank to establish Aviva-NDB Insurance, which was earlier known as Eagle Insurance. Mirror Business earlier reported that three schools of thought had emerged about the ‘cash in hand’ situation faced by Distilleries, with the government deciding to pay back the company in cash instead of treasury bills as agreed, following the verdict of the Sri Lanka Insurance case and the sale of NAMAL stake to Union Bank. The two transactions were able to gain nearly Rs.6.2 billion.

The first school of thought suggests that Distilleries would announce a dividend using the Rs 5.7 billion received from the government. “This is a possibility that cannot be ruled out. But it won’t be a thumping one,” a market analyst pointed out.

The second school of thought is that business tycoon Harry Jayawardena would use the money to further consolidate his control in the companies he has interests in. Analysts think such a move would in a way be positive as Harry J led companies are likely to focus on their core competencies, instead of making investments in rather unknown territories.

The third school of thought comes with the fact that Harry J would divest some of the business he controls such as Lanka Bell and Madulsima Plantation.

“These companies are up for sale because of management and profitability reasons. But when Distilleries has money to inject and restructure, will these entities be sold off?” one analyst questioned.

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