ING will sell its Malaysian insurance business to AIA Group Ltd. (AIA) for a total consideration of c. € 1.3bn. The sale comprises the life insurance business, its market-leading employee benefits business and its 60-percent stake in ING Public Takaful Ehsan Berhad. ING Investment Management's funds management business in Malaysia is outside the scope of this transaction.
The transaction values ING’s Malaysian insurance operations at 16.9 times 2011 earnings and 2.2 times 1H12 book value of c. € 600m, both on an IFRS basis. Earnings until closing will accrue to AIA with closing expected in 1Q13.
ING will realise a net capital gain of c. € 780m on the transaction, subject to potential adjustments at closing.
ING is a leading life insurer in Malaysia offering a complete suite of insurance products, including life, general, employee benefits and Takaful. The latter is offered through ING Public Takaful Ehsan Berhad, a joint venture with Public Bank Berhad, Malaysia's third-largest bank, and Public Islamic Bank Berhad, one of Malaysia's top 5 Islamic banks. ING's insurance businesses inMalaysia serve more than 1.6 million customers through approximately 1,200 employees and approximately 9,200 tied agents.
Our view:
The divestment is part of the EC approved restructuring plan that will see the total divestment of ING’s insurance activities world-wide. By opting for a “cherry picking” strategy (that is: sell country by country) of its Asian insurance activities, ING has obtained a good price for the Malaysian operations. The risk is however that ING will end up at the end with some countries where it is unable to sell its insurance activities.
Conclusion:
We maintain our Accumulate rating and € 9 target.