KUALA LUMPUR: Kurnia Asia Bhd (KAB) yesterday announced that it had submitted an application to Bank Negara Malaysia (BNM) for the approval of Minister of Finance to enter an agreement to possibly dispose of its wholly-owned subsidiary, Kurnia Insurans (M) Bhd (KIMB), to AmG Insurance Bhd.
AmG is the general insurance arm of AmAssurance Bhd and is 49%-owned by Insurance Australia Group (IAG), the largest general insurer in Australia and New Zealand.
On July 21, KAB announced that BNM had no objection for it to commence preliminary negotiations with relevant parties which had expressed interest to acquire a stake in KIMB.
The latest news of the proposed sale of KIMB comes a year after AmG Insurance discontinued acquisition discussions for MAA Insurance’s general insurance business.
In a local news report last week, it was speculated that KAB would most likely sell KIMB at around 2.5 to three times the book value of the company. The report said based on KIMB’s book value of RM720 million as of March 31, the deal would be around RM1.8 billion to RM2.2 billion.
There has been a string of M&As involving local insurers since 2009. In April 2009, BNM had liberalised the insurance sector and announced that to further strengthen the resilience and competitiveness of the insurance and takaful industry, insurance companies and takaful operators are given greater flexibility to tie up with foreign partners.
Accordingly, the foreign equity participation in insurance companies and takaful operators will be increased to a limit of up to 70%. Interestingly, it added that a higher foreign equity limit beyond 70% for insurance companies would be considered on a case-by-case basis for players which can facilitate consolidation and rationalisation of the insurance industry.
It was also noted that existing foreign insurers which participate in the process will be accorded flexibility in meeting the divestment requirement.
Last year, Jerneh Insurance Bhd was sold to US insurer ACE Ltd at 2.24 times book value, making it the highest general insurer deal after the financial crisis hit in 2008.
Berjaya Corp Bhd’s disposal of a 40% stake in Berjaya Sompo Insurance Bhd to its Japanese stakeholder this year had set a new benchmark pricing for general insurers at 3.3 times book value.
PacificMas Bhd also sold its insurance business in March to a foreign insurer, Fairfax, at 1.57 times book value. MAA Holdings Bhd announced in June a proposed disposal of its insurance business to Zurich Insurance Co Ltd at 1.35 times.
For its 3QFY12 ended Sept 30, KAB posted a net profit of RM7.27 million on revenue of RM295.06 million. This was an improvement against a net loss of RM3.75 million in the corresponding quarter last year. KAB attributed the improvement in earnings to stronger underwriting performance.
This article appeared in The Edge Financial Daily, December 20, 2011.
AmG is the general insurance arm of AmAssurance Bhd and is 49%-owned by Insurance Australia Group (IAG), the largest general insurer in Australia and New Zealand.
On July 21, KAB announced that BNM had no objection for it to commence preliminary negotiations with relevant parties which had expressed interest to acquire a stake in KIMB.
The latest news of the proposed sale of KIMB comes a year after AmG Insurance discontinued acquisition discussions for MAA Insurance’s general insurance business.
In a local news report last week, it was speculated that KAB would most likely sell KIMB at around 2.5 to three times the book value of the company. The report said based on KIMB’s book value of RM720 million as of March 31, the deal would be around RM1.8 billion to RM2.2 billion.
There has been a string of M&As involving local insurers since 2009. In April 2009, BNM had liberalised the insurance sector and announced that to further strengthen the resilience and competitiveness of the insurance and takaful industry, insurance companies and takaful operators are given greater flexibility to tie up with foreign partners.
Accordingly, the foreign equity participation in insurance companies and takaful operators will be increased to a limit of up to 70%. Interestingly, it added that a higher foreign equity limit beyond 70% for insurance companies would be considered on a case-by-case basis for players which can facilitate consolidation and rationalisation of the insurance industry.
It was also noted that existing foreign insurers which participate in the process will be accorded flexibility in meeting the divestment requirement.
Last year, Jerneh Insurance Bhd was sold to US insurer ACE Ltd at 2.24 times book value, making it the highest general insurer deal after the financial crisis hit in 2008.
Berjaya Corp Bhd’s disposal of a 40% stake in Berjaya Sompo Insurance Bhd to its Japanese stakeholder this year had set a new benchmark pricing for general insurers at 3.3 times book value.
PacificMas Bhd also sold its insurance business in March to a foreign insurer, Fairfax, at 1.57 times book value. MAA Holdings Bhd announced in June a proposed disposal of its insurance business to Zurich Insurance Co Ltd at 1.35 times.
For its 3QFY12 ended Sept 30, KAB posted a net profit of RM7.27 million on revenue of RM295.06 million. This was an improvement against a net loss of RM3.75 million in the corresponding quarter last year. KAB attributed the improvement in earnings to stronger underwriting performance.
This article appeared in The Edge Financial Daily, December 20, 2011.
