THE BUZZ  

AMMB  Holdings  Berhad has received Bank Negara Malaysia's approval  to  commence negotiations  with  Friends  Life  FPL  Limit  to  repurchase  the  30%  equity  interest  held  by Friends Life in AmLife Insurance and AmFamily Takaful.

OUR TAKE  

An  expected  move.  Given  the  capital  and  economic  challenges  faced  by  European insurance  companies,  we  are  not  surprised  by  UK-listed  life  insurer  and  pension  firm Friends Provident plc's latest announcement to dispose of its 30%  stake  in  AmLife Insurance and AmFamily Takaful back to AMMB Group. This follows a similar proposed sale  of  ING's  insurance  business  in  Malaysia  to  AIA.  Note  that  Friends  Life had purchased  a  30%  stake  in  AmLife  for  RM170m  in  2008  and  since  then,  the  AmLife Assurance fund's asset size has grown by nearly 62%, averaging 15% p.a.

Marginal impact. The life insurance business contributes to 2.5% of group earnings and hence  the  additional  30%  stake  repurchased  from  Friends  Life  is  only  expected  to enhance  group  earnings  by  a  very  marginal  1.1%.  With  the  strategic  partnership  with Friends Life having been in place for only four years, we believe that the latter's exit is not likely to cause a significant fallout in the group's life insurance business, as various key reengineering efforts and infrastructure enhancements are already in place.

Source: OSK