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Aviva Australia buyers circle

NAMES are emerging as potential buyers of Aviva&rsquo;s Australian life assurance business, which is expected to raise around A$1bn (&pound;492m).<br /><br />National Australia Bank and Westpac have emerged as front-runners for the arm, after the former successfully raised &pound;500m last Friday by issuing five-year unsecured notes.<br /><br />Insurance groups Axa Asia Pacific and Australia&rsquo;s AMP are also thought to have submitted indicative bids for the arm, while a venture between ANZ bank and ING remains possible.<br /><br />Aviva has appointed Morgan Stanley and JP Morgan to hunt for possible bidders. A source close to the negotiations said the shortlist &ldquo;will be decided in a few weeks&rdquo;.<br /><br />The sector has been hampered by dire sentiment during the recession, amid fears groups may have insufficient reserves to withstand the downturn and that their investment portfolios may fall to critical levels.<br /><br />Aviva could see its IGD surplus &ndash; the official measure of insurance group capital strength &ndash; rise to one of the highest levels in the industry with the Australia sale.<br /><br />The group said it managed to boost its capital reserves by a quarter in April, after analysts expressed concern when it refused to slash its dividend this year to hoard cash.<br /><br />The IGD level went from &pound;2bn at the end of last year to the &pound;2.5bn reported at the end of the first quarter, although group chief executive Andrew Moss said that figure is actually closer to &pound;2.8bn when short-term market moves are factored out.