MALAYAN United Industries Bhd's (3891) unit, Novimax (M) Sdn Bhd, has put its insurance insurance unit up for sale and will start talks with US-based Liberty International Holdings Inc.
Yesterday, Bank Negara Malaysia gave Novimax the nod to start preliminary negotiations for six months to sell its 52.21 per cent interest in MUI Continental Insurance Bhd (MCI).
The announcement marks the first insurance merger and acquisition (M&A) talk for the year and if successful will be the first entry of the Boston-based insurer into the country.
"It shows that the local insurance market still has value despite it being a slightly more matured market in Asean and may be considered crowded for new entrants," an analyst told Business Times.
He said interest from foreign parties has heightened since the government announced liberalisation measures in 2009 by raising the foreign equity limit to 70 per cent from 49 per cent.
The move is also in line with the Financial Sector Master Plan(FSMP) which has entered its final stage and aims to make Malaysia an attractive place for established international players to set up operations here.
The analyst noted that Southeast Asia's insurance sector is expected to see an uptick in M&As as major foreign players clamour to make acquisitions in the region.
Just like Malaysia, the region is attractive to insurers because it houses 9 per cent of the world population. However, the market is under-penetrated even though people are getting more affluent.
According to the Life Insurance Association of Malaysia (LIAM), most of the local life insurance companies already have foreign equity participation. With the rise in foreign ownership limit to 70 per cent, this will provide opportunities for the players to strengthen their positions.
At the same time, the existing strong local players without foreign participation will also be able to explore potential tie-ups with experienced world players to tap on their expertise.
Groups such as ACE Ltd, Zurich Financial Services, Manulife Financial and Allianz Group are interested in making acquisitions in Southeast Asia, and have been trying to buy insurers here as well.
Last year, Jerneh Insurance Bhd was sold to US insurer ACE Ltd for RM654 million and Pacific Insurance Bhd to Canada-based Fairfax Asia Ltd for RM201 million.
MAA Holdings, meanwhile, in is talks to sell a stake in its local insurance unit to Zurich Insurance after ending negotiations with AmG Insurance Bhd.
Similarly, Allianz Malaysia Bhd is also negotiating with MNRB Holdings Bhd about buying a stake in Takaful Ikhlas Sdn Bhd.
Another example of foreign insurer armed with good capital was when AXA Affin General Insurance Bhd splashed RM453.2 million to buy BH Insurance (M) Bhd.
The largest deal so far this year was when Hong Leong Financial Group merged its non-life insurance business with Japanese Mitsui Sumitomo Insuranceand sold a stake in its life business in deals worth about RM1.55 billion.
The merged group will become Malaysia's second largest general insurer after Kurnia Asia Bhd, based on premiums written. - By Rupinder Singh, btimes.com.my
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