Mitsui Sumitomo Links With Hong Leong to Expand in Malaysia

Mitsui Sumitomo Insurance Co. Ltd. has formed a strategic alliance with Malaysia's Hong Leong Financial Group, a local financial conglomerate, to expand its life and nonlife business.

The Japanese multiline insurer will acquire a 30% stake in Hong Leong Assurance Bhd. for 25.4 billion yen (US$280 million) to expand into Malaysia's life insurance business. The transaction is subject to shareholder and regulatory approval, said Mitsui Sumitomo in a statement.

In Malaysia, Hong Leong's life unit mainly offers endowment, life and unit-linked insurance products. It reported premium income of 24.9 billion yen, with a market share of 4.9% in the fiscal year ended June 30, 2009.

Also, Hong Leong's nonlife operation will be integrated with MSIG Insurance (Malaysia) Bhd., a subsidiary of Mitsui Sumitomo. The combined nonlife unit will be 70% owned by Mitsui Sumitomo and 30% by Hong Leong Financial Group.

This consolidation will make MSIG Malaysia the second-largest nonlife insurer by gross written premiums in the country, with a No. 1 position in fire and marine cargo lines. Hong Leong's nonlife unit reported premium income of 8.2 billion yen, with market share of 2.5% in the fiscal year ending in June.

"The enlarged entity will be more robust and resilient, and poised to better compete and lead in the marketplace," said Raymond Choong, president and chief executive of Hong Leong Financial Group, in a statement. The combined distribution, product development and technical skills will strengthen the company's insurance services.

Malaysia is "one of the most strategically important countries" in Asia and the business alliance will allow the company to simultaneously achieve expansion of its current nonlife business and enter the life market, said Mitsui Sumitomo, a unit of MS&AD Insurance Group Holdings Inc., which was formed with the merger of Mitsui Sumitomo, Aioi Insurance Co. Ltd. and Nissay Dowa General Insurance Co. Ltd. in April. The combined group posted net income of 57.34 billion yen (US$635 million) in the 2009 fiscal year ended March 31, 2010, up from a loss of 9.49 billion yen a year earlier (BestWire, May 25, 2010).

The group intends to "take this opportunity to further accelerate its ongoing effort in establishing a stable business base" in Asia, a spokesperson at MS&AD told BestWeek Asia/Pacific. Proactive investment in life and nonlife business overseas is one of the growth strategies for Mitsui Sumitomo and MS&AD.

MSIG Malaysia will also enter a new bancassurance partnership with Hong Leong Bank Bhd. for the distribution of nonlife insurance products through its 185 branches in Malaysia. Mitsui Sumitomo said it will expand its sales force in both nonlife and life business through this distribution alliance.

MS&AD's two life subsidiaries, Mitsui Sumitomo Kirameki Life Insurance Co. Ltd. and Mitsui Sumitomo MetLife Insurance Co. Ltd., have "much experience of bancassurance" in Japan, enabling the transfer of the know-how and training system for life agents in Malaysia. "We see big growth potential in bancassurance business," said MS&AD's spokesperson.

Malaysia is a politically stable country in which the market offers "a valuable opportunity" in building up business, said Mitsui Sumitomo. MSIG Insurance (Malaysia) offers both commercial and personal nonlife business, while Mitsui Sumitomo Reinsurance Ltd.'s Labuan branch operates reinsurance business.

MS&AD aims to boost the share of its overseas business portfolio to 20%, with net income of 30 billion yen in fiscal year 2013. Mitsui Sumitomo's net premiums from overseas business declined 26.9% to 206.2 billion yen in the 2009 fiscal year ended March 31, 2010. The group's consolidated net premiums of overseas business is expected to grow to 246.9 billion yen for the 2010 fiscal year, according to MS&AD's financial statement.

In March, Mitsui Sumitomo acquired a 7% stake in China's Hangzhou-based Sinatay Life Insurance Co. Ltd. for about 2.4 billion yen. This venture is another of Mitsui Sumitomo's life operations in Asia.

Mitsui Sumitomo Insurance Co. Ltd. currently has a Best's Financial Strength Rating of A+ (Superior).

(By Iris Lai, Hong Kong bureau manager: [email protected])