Insurance Australia Group Limited announced that it is increasing its interest in the general insurance business of AmAssurance, its joint venture in Malaysia, from 30 percent to 49 percent, and at the same time exiting the life insurance part of the business.
IAG said the move is in line with its “strategy to pursue opportunities that strengthen its position in select Asian general insurance markets.”
The restructuring in Malaysia will be accomplished through the “following steps,” said the bulletin:
– Splitting the existing AmAssurance composite insurance joint venture, in which IAG has a 30 percent interest, into general insurance and life insurance components;
– IAG selling its 30 percent interest in the life insurance business; and:
– IAG increasing its interest in the general insurance business to 49 percent, the maximum allowable under Malaysia’s current foreign investment rules. This business will be renamed AmG Insurance (AmG) and will retain the right to use the AmAssurance brand.
Justin Breheny, IAG CEO Asia, commented: “Since acquiring our initial 30 percent holding in the Malaysian joint venture in 2006, we have worked closely with our joint venture partner, AmBank Group, to add value through the transfer of our specialist insurance skills, and we are pleased with the performance of the business.
“During the 2008 financial year, the joint venture’s general insurance gross written premium increased by 15 percent in local currency terms, and we anticipate continued growth in excess of 10 percent for the next few years.
“Following the increase in our equity participation, we look forward to continuing to work with our joint venture partner to grow the business and strengthen its underwriting performance. We’ll do this through further penetration of the joint venture’s distribution network and diversification of its product portfolio.”
IAG also noted that, “regulatory approvals have been received for the restructure, with completion anticipated in December 2008. The restructure will result in a net profit after tax of approximately A$35 million [US$22.5 million] being recognized on the sale of the 30 percent interest in the life insurance business. Following revised local regulatory requirements, IAG’s overall investment in Malaysia will increase by around A$20 million [US$12.83 million].”
The bulletin also noted an earlier decision taken at IAG’s recent Annual General Meeting, that “AmG has signed a memorandum of understanding (MoU) to acquire the general insurance business of Malaysian Assurance Alliance Bhd (MAA), in a move which would make AmG a top three general insurer in Malaysia by GWP. AmG will also acquire a strategic 4.9 percent interest in MAA’s takaful (Islamic insurance) business, MAA Takaful Bhd.
“The MoU is subject to the execution of definitive agreements, and regulatory and other approvals. This transaction is expected to be completed in 2009, at which time further details will be provided.”
Source: Insurance Australia Group – www.iag.com.au