* Acquisition to boost AIA's Malaysia ranking to No. 1
* ING's first deal in Asia asset sell-off
* AIA to fund purchase with internal reserves and debt
* AIA reports 22 pct rise in new business in Q3
By Denny Thomas and Sara Webb
HONG KONG/AMSTERDAM, Oct 11 Pan Asian insurer
AIA Group Ltd has agreed to buy ING's Malaysian
insurance operations for $1.73 billion in cash, handing the
Dutch financial services firm its first deal in a nine-month
drive to sell off Asian assets.
The sale of the Malaysian unit is expected to be followed
soon by the divestment of ING's Japan, South Korea, Hong Kong
and Thailand units, as the bailed-out Dutch financial firm
offloads assets to repay 10 billion euros ($12.9 billion) in
state aid received during the 2008 financial crisis.
For AIA, the purchase of the Malaysian operations marks its
second M&A deal in less than a month, and gives it a leading
position in the fast growing Southeast Asian economy.
AIA was spun out of U.S. insurer AIG in 2010 through
a $20.5 billion IPO, and Hong Kong-based CEO Mark Tucker has
been re-building the business after it lost agents and market
share amid AIG's near collapse during the financial crisis.
"It's a good deal and they are paying up to buy a good
quality business and to expand into a rapidly growing market,"
said Credit Suisse analyst Arjan van Veen, describing ING's
Malaysian business as the "jewel in the crown".
AIA said it was paying a multiple of about 1.8 times
embedded value for the Malaysian business, compared with AIA's
own multiple of 1.5 times. Embedded value is a common measure
for insurance companies and includes the present value of future
profit from long-term insurance contracts.
"This is immediately accretive to earnings. It is cash
positive," AIA Chief Executive Mark Tucker told reporters on a
conference call on Thursday.
Van Veen estimated the deal would add 5 percent to AIA's
earnings per share.
The deal, which confirmed a report by Reuters on Wednesday,
marks ING's first sale after it announced plans to auction its
Asian insurance operations in January as part of a global asset
ING originally wanted to sell its entire Asia insurance
operation, with a book value of 6.1 billion euros, to one buyer
but said it was willing to split up the business if it could
raise more money that way.
"Today's announcement is the first major step in the
divestment of our Asian insurance and investment management
businesses and shows that ING continues to make steady progress
in the restructuring of our company," said Jan Hommen, chief
executive, in a statement.
STRONG DEMAND FOR SOUTHEAST ASIA
ING's Southeast Asian operations attracted bidding interest
due to the region's rapid growth potential. Life premiums in
Malaysia are forecast to grow at 5.5 percent next year, compared
with a world average of 3.7 percent, according to Swiss Re
The race to buy ING's Japan, Hong Kong and much smaller
Thailand operations is still on, with Canada's Manulife
Financial Corp and Hong Kong business tycoon Richard Li
in the running, a source told Reuters earlier.
KB Financial Group is in advanced talks to buy
ING's South Korean operations, sources have told Reuters.
AIA said the Malaysian deal, which is subject to regulatory
approval, would boost its ranking in Malaysia to No. 1 by total
"It's an excellent strategic fit with AIA and it plays
directly to our corporate strengths and priorities," Tucker
said. "Clearly this is one of Southeast Asia's most attractive
The deal would also strengthen AIA's bank distribution
channel, an area analysts believe AIA needs to beef up. The
acquisition would be funded through internal cash resources and
debt financing, AIA said.
AIA also announced a 22 percent rise in its value of new
business (VONB) to $300 million and said its VONB margin had
increased to 42.6 percent, up 11 percentage points from the same
period a year earlier.
Last month, AIA agreed to buy British insurer Aviva Plc's
Sri Lankan operations for $109 million..
ING's Malaysia business sells life, general, and Islamic
insurance products and has about 1,200 employees and over 1.6
ING said it expects a net gain of about 780 million euros
from the transaction, which is expected to close in the first
Deutsche Bank, Morgan Stanley, Evercore Partners, CIMB and
Debevoise & Plimpton LLP advised AIA. Goldman Sachs and J.P.
Morgan advised ING.