Great Eastern’s acquisition plan could drive market position: S&P Global Ratings

Estimated combined assets of AML and AMT accounted for 1.5% of the Great Eastern group's total assets as of the end of 2022.

Great Eastern Holdings Ltd.'s Malaysian subsidiary-led acquisition of AmMetLife Insurance Bhd. (AML) and AmMetLife Takaful Bhd. (AMT) is expected to strengthen its position in the Malaysian insurance and takaful market, according to S&P Global Ratings.

The Singapore-based Great Eastern group is using its Malaysian subsidiaries, Great Eastern Life Assurance (Malaysia) Bhd. (GELM) and Great Eastern Takaful Bhd. (GETB), for this acquisition from AMMB Holdings Bhd.

This acquisition will expand the Great Eastern group's product offerings by adding AML and AMT's insurance and wealth protection solutions. 

Additionally, their 20-year distribution partnership for Malaysian life insurance and family takaful products through AMMB's banking subsidiaries' network will enhance the group's accessibility in Malaysia.

The Great Eastern group's capitalisation is expected to remain strong after the acquisition, benefiting from healthy profitability and high-profit retention. 

As of 30 June, the group had a shareholders' equity of S$7.4b and a profit after tax of S$445.2m, based on International Financial Reporting Standards 17.

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The funding for the acquisition and distribution partnership, totalling S$352m, is expected to come from the cash reserves of GELM and GETB. This amount is considered modest relative to the financial resources of the Great Eastern group.

Despite a slight decrease in solvency levels following the acquisition, we anticipate that the solvency of GELM and GETB will remain comfortably above the regulatory minimum requirement. 

The group is believed to have the financial capacity and earnings potential to absorb the acquisition costs while maintaining a strong capital position. Based on rating agency’s estimates, the combined assets of AML and AMT accounted for 1.5% of the Great Eastern group's total assets as of the end of 2022.

GELM is the largest life insurer in Malaysia, while GETB ranks among the top five takaful companies in the country. The completion of this acquisition is subject to regulatory approvals.