Khazanah buys insurers
It and Canada’s Sun Life paying Rm1.8bil for CIMB Aviva Insurance and CIMB Aviva Takaful
PETALING JAYA: As speculated, Khazanah Nasional Bhd and Canada’s Sun Life Financial Inc have emerged as the buyers of CIMB Aviva Assurance Bhd and CIMB Aviva Takaful Bhd.
Khazanah and Sun Life are forking out a combined RM1.8bil to buy the companies from CIMB Group Holdings Bhd and Aviva plc, the country’s second largest lender. CIMB had owned 51% and Aviva the balance in the CIMB Aviva companies that were formed in a 2007 joint venture. Both are selling out of the business.
Khazanah and Sun Life are acquiring a 98% stake in the said insurance businesses. CIMB Group will retain a 2% share in the company via the issuance of new shares worth RM43.5mil in a new insurance holding company, Renggis Ventures Sdn Bhd, a Khazanah unit.
CIMB Group said the sale of its majority stake in CIMB Aviva would be satisfied via RM1.06bil in cash and the issuance of shares by Khazanah. Sun Life, meanwhile, will be buying its stake from Aviva plc for £152mil (RM734.1mil) cash.
“This is an important investment for Khazanah. It marks not just an opportunity to invest in an asset in a growth sector, but also brings together a unique commercial partnership among three strong parties in their respective areas,” Khazanah managing director Tan Sri Azman Mokhtar told reporters at Khazanah’s annual review.
“We are delighted to be partnering with Sun Life and CIMB,” he said.
The acquisition is still pending regulatory approvals in Malaysia and Canada, and is expected to be completed by the first half of 2013.
“Insurance has met Khazanah’s criteria in several aspects such as a proxy of rising incomes in the region, growth and low penetration rates in the sector. Khazanah has three finance thrusts; universal banking via CIMB, Islamic banking and now insurance,” he pointed out.
He said the sovereign fund would still be hunting for acquisitions of mid-sized insurance companies in the future.
Spurred by the impact of the euro debt crisis, Aviva has been on a divestment spree, selling almost a third of its businesses in a bid to raise capital to beef up its UK and European operations and help boost its flagging share price.
The proposed transaction values CIMB Aviva at 2.4 times first-half financial year 2012 book value. As part of the sale, the buyers are entering into a new 20-year exclusive bancassurance agreement with CIMB Bank.
The exclusive agreement includes the rights to distribute insurance products, including takaful products, through CIMB Bank’s network consisting of 312 branches throughout the country with an exposure to eight million customers.
Sun Life Financial Asia president Kevin Strain reportedly said the transaction was perfectly aligned with its strategy to expand its footprint in Asia.
“With Khazanah and CIMB, we have very strong partners with a broad distribution platform, and we are investing in a country with one of the most developed economies in the Assean region and a growing middle class,” he said.
CIMB Group chief executive Datuk Seri Nazir Razak, meanwhile, said the divestment would enable CIMB to reduce its spread of activities and release capital.
“We look forward to working with the new bancassurance partners we have chosen after an extensive selection process.
“Bancassurance remains a core component of our wealth-management proposition and we believe that the enhanced bancassurance agreement and the potential regional synergies will enable our new partners to manufacture and support a more competitive product range for us to take to our customers,” he said in a filing with Bursa Malaysia.
Prudential Plc and Manulife Financial Corp had also made offers to buy the business from CIMB and Aviva, people with knowledge of the bids were reported as saying in November.
In October, AIA Group Ltd paid US$1.7bil (RM5.13bil) for ING Groep NV’s Malaysian insurance business, valuing it at 2.2 times book value.
The company described Malaysia as one of South-East Asia’s fastest growing life assurance markets.