Malaysian banking group AMMB Holdings has said that it is in the midst of preliminary talks with Singapore-based insurer Great Eastern Holdings (GEH) on the possible sale of AmMetLife Insurance.

In a filing with Bursa Malaysia last week, AMMB emphasised that the talks of its subsidiary were still at a very early stage and there was no certainty that a definitive agreement will take place at this juncture. The group added that such discussions are “an ordinary part of our business review”.

GEH also confirmed in a 1 August bourse filing that talks are “currently ongoing” but the process is “at a preliminary stage”. “There is no certainty that any definitive or binding agreement will be entered into pursuant to these discussions.”

Bloomberg News reported on 31 July 2023 that GEH, a subsidiary of the Oversea-Chinese Banking Corporation (OCBC), is in talks to acquire AmMetLife. GEH is reportedly conducting due diligence on AmMetLife and is seeking regulatory approval to clinch the deal.

AmMetLife, which is jointly owned by US-based MetLife and AMMB, could be valued at between $250m and $300m following the potential transaction.

GEH could pay up to $280m for a 70% stake in AmMetLife Insurance, but the financial impact would be limited, reported the newspaper The Edge quoting Citi Research analyst Mr Tan Yong Hong. This is because Bank Negara Malaysia limits foreign shareholding in local insurance firms to 70%, explains Mr Tan in a note.

According to AMMB’s annual report for FY2023 ended March, AmMetLife contributed MYR76.1m ($22.5m) and MYR65.8 million to FY2022 and FY2023 profit after tax. In comparison, GEH posted profit attributable to shareholders of S$784.2m ($584m) for 2022.

“We believe the financial impact would be limited from GEH’s possible bite-sized acquisition of AmMetLife,” said Mr Tan.

Insurance contributed just 3% of AMMB’s FY2023 profit, which includes AmMetLife and a 30% stake in the combined entity of AmGeneral and Liberty. Hence, this deal with GEH would strengthen AMMB’s capital position but would have limited earnings impact, writes Mr Tan.