MARKET DEVELOPMENT
FGV Sells Insurance Stake For RM70Mil
FGV Sells Insurance Stake For RM70Mil
23/09/2016 (The Star) - Felda Global Ventures Holdings Bhd (FGV) has agreed to dispose of its 16% stake in AXA Affin General Insurance Bhd (AAGI) to Affin Holdings Bhd (AHB) for more than RM70mil, said sources familiar with the matter.
The transaction is set to unlock substantial cash for the planter’s coffers, as FGV is currently embarking on a major monetisation push.
The deal comes right at the end of Bank Negara’s consent period for the two parties to commence negotiations.
In a March 25 letter, the central bank gave consent to both parties to commence negotiotions. The deadline to wrap up the deal ends this week.
“Needless to say, FGV is happy with the divestment. Both sides are satisfied with the terms of the disposal,” said a source.
When contacted over the matter, a spokesperson for FGV refused comment but noted that an announcement will be made in due course. The 16% stake in AAGI is held under Felda Marketing Services Sdn Bhd, which is a wholly owned unit of FGV.
The plantation giant is expected to reap substantial net proceeds, given AAGI’s consistent financial performance and increasing market share over the past five years.
Note that in 2011, Koperasi Permodalan Felda Bhd had divested its 16% stake in AAGI to AHB and realised RM66.03mil in net proceeds.
The stake divestment is a key part of FGV’s plan to unlock cash from its non-core holdings. The group’s chief executive officer Datuk Zakaria Arshad had previously told StarBiz that the group intends to make divestments in two or three companies by the end of this year.
The group’s shares have continued to outperform its peers this year.
On Thursday, FGV shares closed at RM2.50 per share, or its highest in 19 months. To date, the stock has gained 45%.
The gains also coincided with a strong rally in crude palm oil (CPO) prices due to a possible supply crunch which arose from strong export market demand, as well as lower production due to the El Nino phenomenon.
Higher prices also bode well for the earnings potential of plantation companies during the third-quarter period.
According to Malaysian Palm Oil Board data, settlement prices for CPO hit RM2,899.50 per tonne on Sept 21, or the highest in more than two years.
From the perspective of AHB, the stake purchase will allow it to exercise greater control over AAGI’s operations, as well as increase its own earnings base.
The acquisition of the 16% stake would bump AHB’s shareholding in AAGI to 50.51%, or just marginally below the 51% it needs for a controlling stake in the insurer.
The increased shareholding will also see AHB leapfrogging the AXA Group, which currently owns a 43.63% stake in AAGI. AXA is AHB’s joint-venture partner in the insurance venture.
For its financial year ended Dec 31, 2015 (FY15), AAGI reported a net profit of RM83.11mil at the group level compared to RM88.73mil a year ago.
For FY15, the insurer had a gross written premium of RM1.33bil, which represented a 17.7% growth from RM1.13bil in FY14.
Motor insurance is a key driver for the group and accounted for 53% of AAGI’s total business mix in FY15. The group is the fifth-largest general insurer in the country with a market share of 7.9%.
Despite a challenging market environment, AAGI reported a substantial growth in earnings recently.
For the first-half period ended June 30, 2016, the group reported a higher pre-tax profit of RM92.9mil compared to RM71.5mil a year ago.
AAGI’s improved performance was attributed to a higher earned premium of RM91.4mil from the health and motor insurance businesses, a higher investment income of RM6.5mil, as well as a higher gain on disposal of securities amounting to RM8.8mil, according to AHB’s latest quarterly filing.
The transaction is set to unlock substantial cash for the planter’s coffers, as FGV is currently embarking on a major monetisation push.
The deal comes right at the end of Bank Negara’s consent period for the two parties to commence negotiations.
In a March 25 letter, the central bank gave consent to both parties to commence negotiotions. The deadline to wrap up the deal ends this week.
“Needless to say, FGV is happy with the divestment. Both sides are satisfied with the terms of the disposal,” said a source.
When contacted over the matter, a spokesperson for FGV refused comment but noted that an announcement will be made in due course. The 16% stake in AAGI is held under Felda Marketing Services Sdn Bhd, which is a wholly owned unit of FGV.
The plantation giant is expected to reap substantial net proceeds, given AAGI’s consistent financial performance and increasing market share over the past five years.
Note that in 2011, Koperasi Permodalan Felda Bhd had divested its 16% stake in AAGI to AHB and realised RM66.03mil in net proceeds.
The stake divestment is a key part of FGV’s plan to unlock cash from its non-core holdings. The group’s chief executive officer Datuk Zakaria Arshad had previously told StarBiz that the group intends to make divestments in two or three companies by the end of this year.
The group’s shares have continued to outperform its peers this year.
On Thursday, FGV shares closed at RM2.50 per share, or its highest in 19 months. To date, the stock has gained 45%.
The gains also coincided with a strong rally in crude palm oil (CPO) prices due to a possible supply crunch which arose from strong export market demand, as well as lower production due to the El Nino phenomenon.
Higher prices also bode well for the earnings potential of plantation companies during the third-quarter period.
According to Malaysian Palm Oil Board data, settlement prices for CPO hit RM2,899.50 per tonne on Sept 21, or the highest in more than two years.
From the perspective of AHB, the stake purchase will allow it to exercise greater control over AAGI’s operations, as well as increase its own earnings base.
The acquisition of the 16% stake would bump AHB’s shareholding in AAGI to 50.51%, or just marginally below the 51% it needs for a controlling stake in the insurer.
The increased shareholding will also see AHB leapfrogging the AXA Group, which currently owns a 43.63% stake in AAGI. AXA is AHB’s joint-venture partner in the insurance venture.
For its financial year ended Dec 31, 2015 (FY15), AAGI reported a net profit of RM83.11mil at the group level compared to RM88.73mil a year ago.
For FY15, the insurer had a gross written premium of RM1.33bil, which represented a 17.7% growth from RM1.13bil in FY14.
Motor insurance is a key driver for the group and accounted for 53% of AAGI’s total business mix in FY15. The group is the fifth-largest general insurer in the country with a market share of 7.9%.
Despite a challenging market environment, AAGI reported a substantial growth in earnings recently.
For the first-half period ended June 30, 2016, the group reported a higher pre-tax profit of RM92.9mil compared to RM71.5mil a year ago.
AAGI’s improved performance was attributed to a higher earned premium of RM91.4mil from the health and motor insurance businesses, a higher investment income of RM6.5mil, as well as a higher gain on disposal of securities amounting to RM8.8mil, according to AHB’s latest quarterly filing.