MPHB Exit General Insurance

MPHB Capital Bhd is finally poised to exit the general insurance business, a quest it started many years ago without much success. In the latest announcement filed with Bursa Malaysia last week, the company is proposing to dispose of its 51% equity interest in MPI Generali Insurance Bhd (MPIG) to Italian insurer Generali Asia. MPIG is currently a joint venture between MPHB (51%) and Generali Asia (49%).

It sold a 49% stake to Generali in 2015 and had been looking to dispose of another 21% to the Italian insurer since 2020. If the disposal had been approved by the authorities previously, Generali would have increased its stake to 70% — the maximum shareholding allowed for a foreign insurer — and MPHB Cap would have been left with 30%.

MPHB Cap did not want to be left holding 30% of the general insurance company. It is a highly competitive industry and if the partner is not strong, holding 30% may not be worth the investment.

Affin-AXA  - On the same day the company announced the deal with Generali last week, Affin Bank Bhd told Bursa that it had obtained approval from MoF to dispose of 21% of its equity interest in AXA Affin Life Insurance Bhd (AALI) and a 2.95% stake in AXA Affin General Insurance Bhd (AAGI) to Generali Asia NV.

Affin Bank currently owns 51% of AALI and 49.95% of AAGI. AXA owns the remaining equity interest in AALI and AAGI that Generali has proposed to acquire. Generali holding 70% and Affin 30% in a special purpose vehicle that will carry the life and general insurance business of both companies.

Generali’s acquisition of MPIG is happening at a time when many foreign insurers are exiting or have exited the Southeast Asian market. It has been said that Generali is strengthening its presence in Malaysia as it may not have the muscle to expand in Europe.

In MPIG’s website, its shareholders’ funds for FY2020 stood at RM670.9 million. Assuming the transaction is concluded at one time book value, it potentially translates into MPHB Cap getting about RM330 million, based on its 51% stake in the joint venture.

General insurers generally command lower premiums than life insurance companies. In July last year, AMMB Holdings Bhd proposed the sale of its 51%-owned AmGeneral Holdings Bhd to Liberty Insurance Bhd (LIB) for RM2.29 billion, to be satisfied via cash and a 30% stake in LIB.

In June 2016, Swiss insurance company Zurich Insurance Group Ltd (ZIG) acquired MAA Group Bhd’s MAA Takaful Bhd (now known as Zurich Takaful Malaysia Bhd) for RM525 million, valuing the transaction at about four times book value. That was an exception, as the average price-to-book value paid for Multi-Purpose Insurans Bhd, AmLife Insurance Bhd and AmFamily Takaful Bhd by their buyers averaged 2.13 times.