In an effort to bolster its capital position, Insurance giant Aviva is going to sell its £490 million Australian life assurance business.

The insurer’s bankers have received numerous bids for the business. The shortlist of bidders has narrowed down to a handful of banks and insurers, including some of Australia’s biggest banks.

National Australia Bank (NAB) and Westpac are reported to be in the auction along with insurance companies such as Axa Asia Pacific and Australia’s AMP. Aviva has chosen Morgan Stanley and JP Morgan to explore the sale process.

Capital strength has been a tricky issue for Aviva as market mayhem has hammered its investment portfolios. The capital strength of the company was in question earlier this year when its dividend remain unchanged in 2008.