KUALA LUMPUR (July 19): AMMB Holdings Bhd's 51%-owned AmGeneral Holdings Bhd will be disposing of its entire 100% stake in AmGeneral Insurance Bhd (AGIB) to Liberty Insurance Bhd (LIB) for RM2.29 billion, to be satisfied via cash and a 30% stake in LIB.

AmGeneral Holdings entered into an implementation agreement with LIB today (July 19) for the disposal, AMMB said in a bourse filing. The price tag of RM2.29 billion is subject to adjustments, it added.

"AMMB's share of proceeds from the proposed disposal will be satisfied via a combination of cash and shares, which will result in AMMB holding a 30% interest in the LIB and AGIB businesses," AMMB said.

"Upon completion of the proposed disposal, AMMB and Liberty Mutual Insurance Company (the parent company of LIB) will hold a 30% and 70% equity stake respectively in LIB and AGIB. AMMB will be accounting for the proposed disposal as disposal of a subsidiary and, subsequently, will account for the 30% retained interest in LIB and AGIB as an associate undertaking,” it added.

Under the deal, LIB will also acquire the remaining 49% in AGIB from Insurance Australia Group (IAG).

AGIB and LIB's operations will subsequently be formally merged, said AMMB in a media statement.

The combined entity is expected to become the largest motor insurer and the number two property and casualty insurer in the market with an estimated proforma premium base of RM2.3 billion in 2022 based on 2020 data, it said.

As part of the transaction, the prospective merged entity will enter into an exclusive 20-year new bancassurance partnership with AMMB Group to distribute general insurance products, it said.

"AMMB Group is pleased to join forces with a global leader in insurance like Liberty Mutual. We are confident that this proposed transaction will set the stage for us to thrive and compete better, strengthening our positioning in the Malaysian insurance market," said AMMB Group chief executive officer Datuk Sulaiman Mohd Tahir.

"The synergies that we will be able to leverage on will benefit our shareholders, customers, employees and all other stakeholders. As an enlarged entity, we will also have the resources to speed up product development and accelerate the adoption of digital innovation,” he added.

In a separate statement, Liberty Mutual’s Global Retail Markets East President and chief operating officer Matt Nickerson said expanding and investing in international insurance markets is instrumental in Liberty Mutual's aspiration to become a leading global property and casualty insurance company. “Combining Liberty’s global capabilities with AmGeneral’s leading market share in motor and a growing business in additional product lines will create a best-in-class insurance operation,” he added.

AGIB was founded in 2012 with the merger of AmG Insurance Bhd and Kurnia Insurance (M) Bhd in September 2012.

AMMB and IAG had been mulling the sale of the auto insurance business since as early as 2017. In April 2020, Bloomberg reported that the two owners were looking at a price tag of up to US$1 billion at the time and had invited potential suitors to submit their bids, quoting sources.

Notably, this is the second insurance business sale in the local industry this year which has resulted in a local-international ownership of 30:70 respectively, in line with a foreign shareholding structure that was supervised by Bank Negara Malaysia as recently as in 2019.

On June 22, Italian insurer Generali proposed to buy a 70% stake in AXA Affin Life Insurance (AALI), of which 21% is held by Affin Bank Bhd.

Generali’s acquisition in AALI is part of a series of acquisitions, namely 53% in AXA Affin General Insurance (AAGI) and the remaining 51% it did not own in MPI Generali Insurance. The RM1.29 billion deal resulted in Generali owning 70% in AALI and AAGI.

A BNM ruling in 2009 already limited foreign shareholding in insurers to 70%, but the push for greater compliance came only in 2017. In 2019, governor Datuk Nor Shamsiah Mohd Yunus gave a deadline of April that year for insurers to submit their plans on how to comply with the local shareholding rule.

Shares of AMMB closed four sen or 1.39% higher at RM2.92 on Monday, valuing the group at RM9.68 billion.