December 18, 2012 / 5:26 PM / 5 years ago

UPDATE 1-Bankia pays Aviva 608 mln eur for breached agreement

LONDON, Dec 18 (Reuters) - Spain's Bankia is paying 608 million euros ($803 million) to British insurer Aviva for its stake in a joint venture, to settle a dispute over the breaching of an exclusive distribution agreement.

Aviva said in a statement on Tuesday it had reached a settlement with Bankia, which will not affect its other operations in Spain.

The agreement follows an abritration launched by Aviva last year after the formation of Bankia from seven regional savings banks, including heavyweight Caja Madrid and Valencian-based Bancaja.

Aviva had bought a 50 percent stake in insurer Aseval from Bancaja in 2000 and assumed management control of the joint venture, also signing an exclusive agreement to distribute life insurance and pension products.

This exclusive distribution agreement was breached, Aviva said, when Bancaja merged with the other entities as part of a government-driven programme to reduce the number of Spain's unlisted savings banks, or cajas.

Under the terms of the settlement, Aviva will transfer its entire holding in Aseval to Bankia.

Bankia said the deal was an important step in the development of its insurance business that also mitigates the legal uncertainty surrounding the arbitration.

Aviva is the fifth-largest life and pensions provider in Spain and has 1.2 million customers.

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