KUALA LUMPUR, June 18 (Bernama) -- Hong Leong Financial Group (HLFG) and Mitsui Sumitomo Insurance Co. Ltd (MSI) have concluded a RM1.559 billion deal that involves two separate transactions of the general and life insurance business.
In the first, Hong Leong Assurance Bhd (HLA), a unit of HLFG will merge 100 per cent of its general insurance business with MSIG Insurance Malaysia, a unit of MSI for a 30 per cent stake in the new enlarged MSIG Malaysia entity.
The shares will be issued to HLA Holdings Sdn Bhd, the parent company of HLA, and the wholly-owned unit of HLFG, said HLFG's President and Chief Executive Officer, Raymond Choong at the signing ceremony on Friday.
The transaction is valued at RM619 million based on cash flow and profitability.
The enlarged entity will make MSIG Insurance Malaysia the second largest general insurance company in the country, by gross written premium, and place it in the top position for fire insurance and marine cargo insurance.
The second part of the transaction involves HLA Holdings Bhd, which will divest a 30 per cent stake in HLA's life insurance business to MSIG Insurance Malaysia's parent company, MSI for RM940 million.
The completion of the transfer will result in HLA Holdings owning a 30 per cent stake in MSIG Insurance Malaysia and 70 per cent of HLA.
Mitsui Sumitomo in turn, will directly and indirectly, own 65 per cent of MSIG Insurance Malaysia and have a direct 30 per cent equity in HLA.
Choong said the partnership will enable HLFG to focus on elevating its life business to the next level, amid the challenges facing it.
"We will benefit from the synergies of working with MSIG and in sharing expertise and innovations to enable us to keep pace with the ever changing needs of today's discerning customers," he added.
He also stated that the opportunity to cross sell, will further solidify the group's position and market place reach, adding, the group will continue to maintain its composite insurance company status.
"To be very successful, we need to go beyond being just a stand alone. The partnership will enable us to grow a lot faster," Choong said.
Asked how MSI will finance the purchase of 30 per cent stake in HLA's Life insurance unit, its Director and Managing Executive Officer, Masaaki Nishikata said it will be via internally generated funds.
He also cited the RM940 million as a fair price for the stake based on the valuation done for the company.
According to Mishikata, for the general insurance, MSI is keen to share bancassurance best practices with Hong Leong Bank to deliver more comprehensive financial planning to customers.
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