Friends Provident expands Asia footprint via AmLife

The move gives Friends Provident a stake in a fast-growing Malaysian business and pushes its Asian expansion further.
UK-listed life and pensions company Friends Provident has bought a 30% stake in Malaysian firm AmLife Insurance, the specialist life insurance operation of AmBank Group. The stake was purchased from parent company AMMB Holdings for RM170 million ($46.8 million).

The move gives Friends Provident a stake in a fast-growing Malaysian business that will help the firm gain access to retail and institutional investors in that market. It also expands the UK firmÆs footprint in Asia, which is expected to contribute significantly to its overall growth in the future.

"Friends Provident is committed to the Asian region and entering the Malaysian market is a natural and exciting progression of our strategy, complementing our operations in Hong Kong and Singapore," says Friends Provident chairman Adrian Montague, who was in Kuala Lumpur yesterday for the completion of the acquisition.

At the start of this year, Friends Provident rolled out plans to aggressively expand in Asia through joint ventures, partnerships, taking minority stakes in a local entity or other means. Its investment in AmLife Insurance û which has an established position in both agency and bank distribution in Malaysia û assures it of a strong distribution network in that market. AmLife Insurance's annualised new life business premiums grew by a healthy 18% to RM93 million ($25.6 million) in the 12 months to March 31, 2008, including 27% growth in sales through bank distribution.

Friends Provident CEO Trevor Matthews describes the investment in AmLife Insurance as a modest one, but one that is strategically important.

Friends Provident was founded in 1832 in the UK as a life insurance company. It is now the third largest pension provider in the UK, with more than $200 billion in assets under management worldwide. Outside the UK, it operates in Hong Kong, Singapore and Dubai and provides life, investment and pension products to around 2.5 million customers.

The growth of Friends ProvidentÆs Asian business has been strong over the past five years, and this region is quickly overtaking contributions of the firmÆs home market to its bottom-line.

The agreement between Friends Provident and AMMB Holdings has been approved by the Malaysian regulators. It was subject to completion of an associated transaction between AMMB Holdings and Insurance Australia Group (IAG) for which regulatory approval has also been granted and an agreement has been signed.

The agreement between AMMB Holdings and IAG includes a provision for a potential future increase in Friends Provident's stake, subject to regulatory approval.

Under the new arrangement, the life insurance and general insurance businesses have been split. AmLife now covers the life insurance business. The general insurance operations provided by AmAssurance have been transferred to a separate legal entity, AmG Insurance, in which IAG holds a stake. AmLife and AmG collectively have a sales force of more than 6,000 and a distribution network of 200 branches which will continue to carry the brand name AmAssurance.

Friends Provident expects to collaborate with AmLife Insurance to share its expertise in product development, technology, and potentially pensions, which are expected to be an area of future profitable growth in the Malaysian market. The gross assets of the life and shareholder funds of AmAssurance were valued at RM1.949 billion ($536.9 million) as of March 31, 2008.

The transaction between Friends Provident and AMMB Holdings involved a back-to-back spin off of the general insurance business and the need to synchronise a range of related regulatory approvals. Singapore corporate partner Veronica O'Shea at international law firm Herbert Smith led the transaction and was assisted by Peter Workman, Vik Tang, Susan Leung and Ong Sin Wei. Malaysian law firm Skrine advised Friends Provident on the Malaysian law aspects of the transaction.
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