by daljit dhesi
Less than a month after making an offer to acquire a 51% stake in the life and general insurance businesses of MCIS Zurich Insurance Bhd (MCIS Zurich), the Sanlam group is said to be in talks to divest the general insurance segment to Canadian-based Fairfax Group.
Sources said the Fairfax Group, which wholly-owns Pacific Insurance Bhd via Fairfax Asia Ltd, was keen on the general insurance business of MCIS with a view of merging it with its current operations in Malaysia.
As for the Sanlam group, the disposal was necessary as it already had exposure to the general insurance business through Pacific and Orient Insurance where the South African group has a 49% equity.
According to Bank Negara regulations, an insurer is not allowed to hold more than one licence.
"Discussions are still ongoing between Sanlam and Fairfax groups and valuations are likely to be in the range as seen in recent transactions for general insurance companies," said the source.
Most general insurance companies are being transacted at valuations of between 1.2 to 1.8 times book value, depending on the customer base. For instance, if the general insurer has a captive business such as a banking group, it would command a higher premium.
Both MCIS Zurich and Pacific Insurance could not be reached for comments.
Industry observers viewed the speculated divestment of MCIS’s general insurance business by Sanlam group positively because the proceeds could be used for other investment purposes and it would average down its cost of entering the Malaysian insurance market.
Last year, Sanlam Emerging Markets acquired a 49% stake in Pacific & Orient Insurance for RM270mil which translated to 2.5 times price to book.
The valuation was considered among the highest in the industry where general insurance companies normally transacted at less than 1.8 times book value.
Then, last month (on April 24), Sanlam Emerging Markets, a unit of Sanlam Ltd, made an offer to acquire a 51% stake in MCIS Zurich from Koperasi MCIS for about US$118.4mil (RM387.6mil) or at a price-to-book value of 1.7 times.
The convulated deal would see Zurich Asia exiting from MCIS Zurich where it has a 40% stake.
Under the terms of the transaction disclosed in an announcement last month, Sanlam group would acquire 40% in MCIS Zurich from Koperasi MCIS and make an offer to buy another 11% from other shareholders. Should there be a lack of interest in the offer from minorities, Sanlam would go back to Koperasi to make up the difference.
Fairfax group made its entry into the Malaysian insurance business in 2011 when it acquired Pacific Insurance from PacificMas Bhd for RM216.5mil that tagged the value at 1.6 times book.
The insurance industry has seen a hive of mergers and acquisitions activities since 2010 when Bank Negara liberalised the market to allow foreign insurers to take up a substantial stake in local insurers.
Bank-backed insurance companies commanded the highest valuations of up to three times book value when disposing a portion of their interest to foreign partners
Source The Star Newspaper
No comments:
Post a Comment