Ambank looks to sell stake in insurance arm

PETALING JAYA: AmBank Group is looking to sell a stake in its insurance arm to a new partner by June, a report said, adding that it had received interest from several unidentified parties.

Managing director Ashok Ramamurthy was quoted as saying in a Bloomberg report it wanted to sell its stakes in its conventional and Islamic insurance units, slightly more than a week after it repurchased the 30% stake in Am Life and Am Family Takaful from its joint-venture partner Resolution Ltd. It completed the acquisition for RM245mil, implying a price-to-book value multiple of 1.7 times.

StarBiz understood the new partner was likely to be a foreign party that could bring in the expertise to help the company through the gestation of its newly enlarged insurance unit.

“Foreign insurers might be keen to take up the stake in order to tap into the Malaysian insurance market which provides growth potential,” an observer said.

The bank could not be reached for comment at press time.

In a report, MIDF Research said the buyout of the 30% stake was consistent with its strategy to grow noninterest income, while contributions to its bottom-line earnings were expected to be marginal in the near term.

“In the first half of financial year ending March 31, 2013, the life insurance business reported a profit of RM4.7mil, contributing only 1% to group net profit,” it said.

Besides that, the bank completed its acquisition of Kurnia Insurans (M) Bhd for RM1.63bil last year via its 51%-owned AmG Insurance Bhd, emerging as the biggest general insurer in the country in the process.

“Meanwhile, the general insurance business reported a higher profit of RM60.3mil, with a 7% contribution to group net profit.

“We believe that takaful insurance has growth potential, but in the near term, the insurance fee income will be driven largely by its general insurance business from the combined entity of AmG Insurance and Kurnia, which has emerged as the leading general insurer locally and the market leader in motor insurance,” MIDF Research noted.

Ashok told a daily that the acquisition of Kurnia would lead to cost savings of RM50mil for the group over a two-year period.