S&P Global Ratings says Great Eastern Holdings G07 ’ (GEH) Malaysian subsidiary-led proposed acquisition of AmMetLife Insurance Bhd. (AML) and AmMetLife Takaful Bhd. (AMT) will enhance its market leadership within the Malaysian insurance and takaful market.
The consideration for the proposed acquisition and exclusive twenty-year distribution partnership is approximately RM1,121 million (or the equivalent of $325 million). Based on the audited financial statements of AML and AMT as at March 31, the aggregate net asset value of AML and AMT was approximately RM819 million. The cash resources are “modest” compared to GEH’s financial resources S&P points out.
“The addition of AML and AMT's insurance and wealth protection solutions will supplement the Great Eastern group's product offerings. Their exclusive 20-year distribution partnership for all their Malaysian life insurance and family takaful products through AMMB's banking subsidiaries' network will increase the group's accessibility within Malaysia,” S&P says.
According to the ratings agency, GEH’s prospective capitalisation after the proposed acquisition is likely to remain robust, benefitting from healthy profitability and high profit retention. As of June 30, 2023, GEH’s shareholders equity stood at $7.4 billion, with a profit after tax of $445.2 million, based on International Financial Reporting Standards 17.
Solvency ratios at Great Eastern Life Assurance Malaysia (GELM) and Great Eastern Takaful (GEK) are expected to remain well above the regulatory minimum requirement, despite a slight decline after the proposed acquisition.
“Based on our estimates, the combined assets of AML and AMT represented 1.5% of Great Eastern group's total assets as of end-2022,” S&P says.
See also: Vitasoy ‘open to collaboration’ as speculation mounts over Philip Ng takeover
GELM is the largest life insurer and GET is among the top five takaful companies in Malaysia. The completion of the proposed transaction is subject to regulatory approvals.
In 2019, GEH acquired PT QBE General Insurance Indonesia. In 2006, Great Eastern and Chongqing Land Properties Group set up Great Eastern Life Assurance (China) Company (GELC), in a 50:50 joint venture. In 2012, GEH divested a 25% stake in GECL to Chongqing City Construction Investment (Group) Co.
