OSK Research Sdn Bhd expects AMMB Holdings Bhd's repurchase from Friends Life FPL Limit its 30 per cent stake in AmLife Insurance Bhd and AmFamily Takaful Bhd, to enhance its earnings by only
1.1 per cent.
In a statement today, the research house said life insurance business only contributed 2.5 per cent to the group's earnings.
OSK Research also believed that the exit of Friends Life would not cause a significant fallout in the group's life insurance business, with various key reengineering efforts and infrastructure enhancements already in place.
Yesterday, AMMB Holdings obtained Bank Negara Malaysia's approval to commence negotiations with Friends Life, a United Kingdom-listed life insurer and pension firm, to repurchase a 30 per cent equity interest in AmLife and AmFamily.
OSK Research noted the proposal was in line with its expectation given the capital and economic challenges faced by European insurance companies.
It has maintained a "neutral" call on AMMB Holdings with unchanged fair value of RM7.07 per share.
Meanwhile, Hong Leong Investment Bank said it is still premature to ascertain the financial impact towards AMMB Holdings as the parties have not signed any definitive agreement.
It kept a "hold" call on AMMB Holdings with an unchanged RM6.62 target price.
Friends Life had purchased a 30 per cent shareholding in AmLife for RM170 million in 2008, since then the AmLife Assurance fund's asset size has grown by nearly 62 per cent, averaging 15 per cent per annum.
The joint venture was subsequently extended to Family Takaful in December 2011, with a further investment by Friends Life of a 30 per cent stake in AmTakaful. -- Bernama
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