Friday October 12, 2012
AIA Group all set to become the top life insurer in M'sia
By LIZ LEE
KUALA LUMPUR: AIA Group Ltd, set to become the top life insurer in Malaysi a after acquiring ING Malaysia, will leverage on the latter's operations to enhance its insurance offerings.
The group, curre ntly in the fourth position in life insurance, will stand to gain from ING's strong base in bancassu rance. It is expected to take on the No. 2 spot as a bancassurance player.
By absorbing ING Malaysia, AI A will have a 24.8% share in the life insurance mar ket from 11.3% previously. Also, 14% of its annualised new premium will come from bancassu rance, an increase from the current 1%.
“They have a very successful partnership with Public Bank and we believe we can grow the bancassurance business. As Public Bank is very much a retail bank with five million customers, there is huge opportunity to grow,” he said.
Ng said the acquisition would benefit AIA on several o ther fronts including employee benefits or group insurance, which ING has a 50% market share.
“We will continue to grow the takaful business now that we have more agents and a very big bank that can market our takaful pro ducts. We are excited about the opportunities,” he said.
Aside from that, Ng said that AIA aimed to expand its geographical coverage within Malaysia.
ING Malaysia was the third largest life insurer in Malaysia, serving more than 1.6 million customers and offering other products such as general, group and takaful insurance.
“ING is a quality business with very good people. It's not often we can get good companies which have been so well-managed,” he said, adding ING Group was selling its Malaysian business only because of its financial bailout from the Dutch gove rnment in 2008.
AIA's strength is in its investment-linked products, being at one of the top three in Malaysia.
The US$1.73bil (RM5.31bil) acquisition, announced yesterday, confirmed a StarBiz repor t that a deal was imminent.
AIA estimated that the acquisition would be completed in the first quarter next year, and immediately accretive to its earnings.
The acquisition will be funded through internal cash resources and external debt financing.
Ng said while the group was cash rich and could do without debt financing, AIA might consider it because borrowing was rather cheap in the current market. He added that the funding “will not in any way affect the company's dividend payment capability”.
Ng said that the combined life insurance premium from the both companies would be US$2.05bil (RM6.29bil). As for its new total customer base, AIA would have an estimated 2.8 million customers.
After the acquisition, the new AIA Group would have an estimated net profit of RM721.5mil, annualised new premium of RM1016mil and a value of new business of RM994.7mil.
With the ING injection, AIA will double its total agents to 16,600 from 7,400, to become the biggest agency force locally. Malaysia will be the fourth largest business in the AIA Group after Hong Kong, Thailand and Singapore.
“We believe that this is a market that has great potential with a good future. It is a growth market,” Ng said, adding that almost 50% of Malaysians are under-insured. As for its internal strategy to revamp the combined group, Ng said that while the plan was to synergise on the best operations within each company, the most important was talent retention.
“We will take the best from both sides going forward as we have different strengths but the most important is to ensure that we keep all our best people,” he said.
“That's how the business can grow bigger.”
Ng said that it was too early to consider retrenchment but believed that natural attrition would not be surprising.
“We want to reassure our colleagues from ING that whatever we do will be fair and transparent.”
Standard & Poor's Ratings Services said yesterday that its ratings and outlook on American International Assurance Co Ltd and American International Assurance Co (Bermuda) Ltd are unaffected by the AIA Group's recent announcement that it plans to pay US$1.73bil in cash to acquire ING Malaysia.
It said:”In our view, the transaction will not have a material impact on the group's credit profile, and therefore we don't expect the acquisition to change our assessment of the overall business and financial risk profiles of AIA and AIAB.”