Potential sale of IAG’s interest in Malaysian business
IAG has announced that AmGeneral Holdings Berhad, the Malaysian business in which it holds a 49% interest, has signed an Implementation Agreement for the proposed sale of its insurance business to Liberty Insurance Berhad (Liberty).
AmGeneral Holdings Berhad is the general insurance arm of the AMMB Group (AmBank), which owns the remaining 51% interest. Its wholly-owned subsidiary AmGeneral Insurance Berhad (AmGeneral) sells general insurance products under the AmAssurance and Kurnia brands.
The Implementation Agreement sets out the terms on which the parties will seek required regulatory approvals for the sale from Bank Negara Malaysia and the Minister of Finance. Subject to receiving these approvals, the parties will execute a Share Purchase Agreement under which:
- Liberty will acquire 100% of the shares in AmGeneral and AmBank will hold a 30% interest in the insurance operations of Liberty and AmGeneral, while IAG will exit its investment in AmGeneral;
- Completion will be conditional on the Malaysian High Court approving a capital reduction and distribution of the sale proceeds to IAG; and
- IAG’s share of the sale proceeds will be $3401 million, payable in cash and subject to post-close adjustments.
The transaction, which remains subject to regulatory processes and approvals (including from Bank Negara Malaysia and the Minister of Finance), is expected to complete during IAG’s financial year ending 30 June 2022 (FY22). IAG expects to incur a loss of approximately $901 million which will be recognised in the FY21 results as part of amortisation and impairment given the asset will now be recognised as held-for-sale. The sale is expected to result in an increase in IAG’s regulatory capital position of approximately $1501 million at completion.
1 Based on a Malaysian Ringgit exchange rate of 3.1285 at 30 June 2021