Proposed disposal of life insurance business to the Great Eastern Group

AMMB Holdings Bhd and MetLife International Holdings, LLC (MetLife) have unveiled plans to sell their combined 100% stake in AmMetLife Insurance Bhd (AML) and AmMetLife Takaful Bhd (AMT) to the Great Eastern Group for an estimated RM1.12bn. In the announcement filed with Bursa Malaysia, AMMB reported that its wholly-owned subsidiary, AMAB Holdings Sdn Bhd, has entered into an implementation agreement with MetLife, as well as with the subsidiaries of Great Eastern Holdings Ltd, namely Great Eastern Life Assurance (M) Bhd (GELM) and Great Eastern Takaful Bhd (GETB) for the proposed transaction. The current structure of shareholdings in AML and AMT are as follows:

• AML : AMAB owns 50% less 1 share, MetLife owns 50% plus 1 share

• AMT : AMAB owns 50% plus 1 share, MetLife owns 50% less 1 share

Estimate CET1 Could Increase by 40 Bps Post Disposal

We anticipate that the proposed transaction would translate to a PBV of around 1.2x. We estimate that the proposed disposal would strengthen AMMB’s CET1 by about 40 bps. To recap, AMMB reported FHC CET1 of around 12.6% in the recent 1Q FY24. Additionally, we do not anticipate any significant adverse impact on the group's earnings from the disposal of the Life Insurance business, as this segment contributes approximately 5% of the group’s total non-interest income in FY23.

Optimistic About Exclusive 20-year Banca Agreements

Meanwhile, we are optimistic about the establishment of an exclusive 20-year agreement for bancassurance and bancatakaful between GELM, AML, GETB, and AMT as part of the proposal. According to the announcement, these agreements will enable the distribution of life insurance and family takaful products through AMMB's banking subsidiaries, AmBank (M) Bhd and AmBank Islamic Bhd, throughout Malaysia.

Impact

We make no change to our earnings projections pending more clarity on this proposed disposal from management. The proposed sale is contingent upon obtaining regulatory approvals from Bank Negara Malaysia and/or the Minister of Finance, as well as the Monetary Authority of Singapore.

Valuation and Recommendation

We maintain AMMB’s TP at RM4.30. Our valuation is based on an implied PBV of c. 0.73x based on the Gordon Growth Model. BUY reiterated on AMMB.

Source: TA Research - 3 Oct 2023