U.K. insurance company Aviva PLC (AV.LN) Friday launched plans to expand in the Asia general insurance market, returning to Singapore after an absence of five years in a bid to tap the region's significant growth potential.

The company was locked out of Singapore and some other Asian markets by a non-compete clause when it sold its Asia general insurance business to Mitsui Sumitomo (8725.TO) in 2005 for $450 million.

That clause expired earlier this year. The Friday announcement follows U.K. rival Prudential PLC's (PRU.LN) $35.5 billion bid for American International Group Inc.'s (AIG) Asian business last month. Aviva is the largest insurer in the U.K. by net written premiums, ahead of Prudential.

Aviva said it started selling car insurance online in Singapore from Friday with plans to move into home and travel insurance soon as a base for expansion throughout the Asia region. An Aviva spokeswoman declined to give earnings targets for the new business.

"Our entry into Singapore marks the first step in our plan to penetrate the rapidly expanding general insurance market in Asia," said Simon Machel, chief executive officer of Asia Pacific. Machel said the rising affluence of Asian consumers has led to an increasing demand to insure their growing assets.

Aviva already has general insurance operations in Sri Lanka and Malaysia. Its general insurance and health premiums in the Asia Pacific region were GBP49 million in 2009 out of a total worldwide of GBP9.19 billion.

Machel said the company is evaluating other Asian markets but wouldn't name them.

Prior to exiting its general insurance business in parts of Asia, Aviva operated in 13 countries including Singapore, Hong Kong, Malaysia, Thailand, Indonesia, the Philippines, Macau and Brunei. "What I can say is that we won't be in all the markets we were in before," Machel said.

In March, Aviva said 2009 operating profit fell 12% from the year before as the recession hit consumer spending on insurance. The company said the outlook for the market was still unpredictable despite a slight savings pickup late last year.

CEO Andrew Moss said at the time that the company's priority was to grow its business organically in the near term rather than through major acquisitions.

Speaking about the company's Asian business, Moss said: "Nobody argues that the economic growth in parts of Asia is going to be strong... We see the development of our Asian business in a steady way, which builds organically, often working with banks, building on Aviva's bancassurance capability. We see that as an effective way to create value for our shareholders."

At 1025 GMT, Aviva shares were up 6 pence, or 1.5%, at 385 pence, outperforming the Stoxx Europe 600 insurance index, which was up slightly. They have fallen by around 3.5% since the start of the year.

-By P.R. Venkat, Dow Jones Newswires; +65 64154 152; venkat.pr@dowjones.com

(Digby Larner and Vladimir Guevarra contributed to this item.)
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