KUALA LUMPUR: Japan’s Mitsui Sumitomo Insurance Co Ltd (MSI) is stamping a bigger footprint in Malaysia by merging its non-life insurance business with Hong Leong Financial Group Bhd’s (HLFG) and buying its life business under Hong Leong Assurance Bhd (HLA).
Under the agreement sealed yesterday, HLFG will merge its non-life insurance business with that of MSIG Insurance (M) Bhd, the local unit of MSI for RM619mil.
HLFG is also proposing to sell a 30% stake in Hong Leong Assurance Bhd (HLA) to MSI for RM940mil cash.
The merger involves the issuance of new MSIG shares, representing 30% of MSIG’s enlarged issued and paid-up capital, to HLFG.
The move to combine the businesses of both companies would result in the creation of the second largest general insurer in the country, HLFG president and chief executive officer Raymond Choong said at the agreement signing ceremony yesterday.
In addition, owning the HLA stake would provide MSI with exposure to the life insurance business in Malaysia, he added.
The completion of the exercise will result in HLFG via its subsidiaries owning a direct 30% stake in MSIG and retaining a 70% equity interest in HLA.
Trading in HLFG shares was suspended yesterday pending the announcement. The stock gained 1.3% to RM8.38 at the close on Thursday and will resume trading Monday.
Choong said customers would benefit from the combined distribution strength, more sophisticated product development and technical expertise of both insurance outfits.
“We will work together to ensure a smooth transition over the next few months,” he said.
The value of the deals was agreed upon based on cash flow, profitability and prospects, he said, declining to reveal more.
The proposed transaction was expected to be completed by the fourth quarter of this year, he said.
MSI director and managing executive officer Masaaki Nishikata said the company, one of the largest insurers in Japan, would fund its purchase of the 30% stake in HLA via internally generated funds.
The RM940mil price tag was “fair”, Nishikata said.
HLA group managing director and chief executive officer Loh Guat Lan said HLA’S general insurance premiums totalled RM1.12bil last year and life premiums RM1bil.
She said the company had been maintaining “double-digit growth” annually over the past few years and hoped to maintained that, helped by the new partnership and new products.
HLA is one of the largest insurers in Malaysia while MSI ranks among the top five insurers in the Asia-Pacific region.
- by thestar.com.my
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