Given its strategy to grow into emerging markets, MetLife Inc. (MET) inked a deal with Malaysia-based AMMB Holdings Bhd. (AMMB) to acquire major stakes in the latter’s AmLife Insurance Berhad (AmLife) and AmFamily Takaful Berhad (AmTakaful) for about $249 million. However, the culmination of the transaction is subject to regulatory approvals.
Armed with assets worth $39.3 billion, 187 branches and over 4 million retail customers, AMMB is the holding company of the 5th largest banking group (AmBank Group) in Malaysia, based on market capitalization. Meanwhile, AmLife is strongly operating as a life insurer since 1973, and offers an array of protection, savings and investment-linked products via agency, bank and group channels.
On the other hand, MetLife will also tap the takaful business, which is a form of Islamic insurance that assures reimbursement in case of loss through a co-operative system based on shared responsibility. AmTakaful distributes Shariah-compliant products since Jan 2012.
Per agreement, MetLife will acquire more than 50% of AmLife and slightly less than 50% of AmTakaful. Moreover, the strategic alliance entails MetLife to sell its products on the AMMB platform for at least 20 years.
The latest deal is backed by MetLife’s need for expansion in to emerging markets of South East Asia, which had entailed the company to form a life insurance joint venture (JV) with Bank for Investment & Development of Vietnam (BIDV) and Bank for Investment and Development of Vietnam Insurance Corporation (BIC) in Sep 2013.
The JV is scheduled to be functional in 2014. Previously, MetLife had also acquired a pension provider in Chile for $2 billion and opened a representative office in Myanmar.
MetLife’s customer-centric business model should further help it penetrate into emerging economies such as Malaysia, Chile and Vietnam. The global insurance company estimates emerging economies to contribute about 20% to its earnings by 2016, up from 14% in 2012. This reflects the company’s firm conviction of growth from international operations.
We believe that the deal with AMMB in Malaysia fits well with MetLife’s long-term growth strategy. The company’s consistent focus on catering to market demand and enhancing international growth should boost its operating and competitive leverage going forward.
While MetLife carries a Zacks Rank #3 (Hold), outperformers in the insurance sector include CNO Financial Group Inc. (CNO), Kemper Corp. (KMPR) and Old Republic International Corp. (ORI). All these stocks sport a Zacks Rank #1 (Strong Buy).
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