Prudential Expands Asian Footprint

In an effort to expand its reach in the Asian region, U.S. life insurer Prudential Financial Inc. (PRU) has entered into a joint venture with Malaysia based Bank Simpanan Nasional (“BSN”).

Per the agreement, Prudential and BSN will purchase all the outstanding shares of Uni.Asia Life Assurance Berhad’s (“UAL”) from Uni.Asia Capital Sdn Bhd (“UAC”).

UAC is a joint venture, which is 51% owned by DRB-HICOM Berhad’s wholly owned subsidiary Gadek (Malaysia) Berhad and the rest is owned by United Overseas Bank (Malaysia) Berhad.

For the transaction to progress successfully, both Prudential and BSN have sent a requisition for approval to the Malaysian insurance regulator, Bank Negara Malaysia. The transaction will likely see light by the end of 2013.

The purchase of UAL will cost BSN and Prudential $160 million collectively. While Prudential will hold 70%, BSN will be the owner of the remaining 30% of the ownership of UAL.

After the completion of the transaction, UAL will sign a strategic, long-term bancassurance agreement with BSN. The agreement will require UAL to distribute its conventional life insurance products by using BSN’s banking network in Malaysia which includes 397 branches, 3,593 Registered Banking Agents and 8.22 million customers.

UAL already distributes its life insurance products via Posassurance in Malaysia with an existing agreement with Pos Malaysia Berhad.

Both the companies Prudential and BSN have picked up UAL to capture the Malaysian market since UAL has a significant scale and reach in the market. It has branches across all the major towns in the country. UAL serves affluent and emerging affluent class of population via its agents while the masses are targeted with its Bancassurance and Posassurance channels.

Malaysia seems to be an attractive market growth opportunity for both Prudential and BSN because of it is an underpenetrated market and has a well developed regulatory environment.

Prudential is building upon its success strategy deployed in other Asian markets such as Japan, Korea and Taiwan, now to gain success in Malaysia.

Upon completion of the transaction Prudential and BSN plan to develop a high-quality agency sales force based on PFI’s highly successful Life Planner model. This will target customers in the urban and semi-urban centers and rural areas of Malaysia via needs-based selling and other attractive alternative channels.

Other life insurers MetLife, Inc. (MET), and American International Group, Inc. (AIG), also have a significant presence in the Asian region.

Prudential carries a Zacks Rank #2 (Buy). Another player CNO Financial Group, Inc. (CNO) with Zacks Rank#1 (Strong Buy) is worth investing in.