Malaysia’s AmBank weighs general insurance biz sale for up to US$500mil -sources

CIMB Research said AMMB would start to realise cost savings of RM80mil per annum from its mutual separation scheme from FY19F onwards.

HONG KONG: Malaysia’s AMMB Holdings (AmBank) Bhd is weighing a sale of its general insurance business as part of a move to exit non-core businesses and focus on its main bank operations, said three people with knowledge of the development.

AmGeneral Insurance Bhd, of which AmBank owns 51 percent with the rest held by Insurance Australia Group Ltd (IAG) , Australia’s biggest general insurer, could be valued at US$400mil to US$500mil, the people told Reuters.

IAG is also likely to divest its stake as part of the sale process, they said, adding a formal auction process is likely to be launched early next year.

The divestment, if completed, will add to the trend of Asian banks exiting from insurance to free up capital and focus on core banking businesses amid tougher regulatory capital buffer requirements and competition from pure-play insurers.

The Asian insurance sector has seen merger and acquisition volume rising to nearly US$21bil this year as of Wednesday, from US$15.5bil in the whole of last year, Thomson Reuters data showed.

The plans to sell AmGeneral come months after talks to sell AmBank to bigger local rival RHB Bank Bhd fell through. RHB had been in discussions to acquire AmBank in an all-stock deal.

AmBank has come under pressure from some of its shareholders to become “leaner” after the calling off of the deal, one of the people said.

The people were not authorised to speak with media on the matter and so declined to be identified.

AmBank declined to comment on its divestment plans for the general insurance business when contacted by Reuters.

An IAG spokeswoman also would not comment on its holding in AmGeneral. She referred Reuters to comments made by IAG Chief Executive Peter Harmer at the annual shareholders meeting in October, when he said that while the insurer had been looking for opportunities to raise its investment in its key markets of Thailand, Malaysia and India, it had not been able to find the right circumstances and was unlikely to make further investments in Asia in the short term.

Besides banking and general insurance, AmBank’s other business interests include life insurance, fund management, private banking, investment banking and capital market services, according to its website.

For the six months ended September, AmGeneral’s net earned premiums fell 1.6 percent to RM706mil (US$172.87mil), while net profit during the period was nearly unchanged at RM122mil, its financial results showed.

Two of the people said potential bidders for the business could include some of the large foreign general insurers with an existing presence in Malaysia, as well as Chinese insurers.

There is, however, no certainty the sale process would be completed any time soon, and AmBank or IAG could decide to drop their plans to divest if bids do not match their expectations, one of the people said - Reuters.