Australia's biggest general insurer by market share is planning to sell its four Southeast Asian businesses, under a review of its Asian operations, three people with knowledge of the matter have revealed.
The Asian market has proven to be a challenge for IAG despite its years of investments, with the insurance giant reporting a $6m underwriting loss in the region in its fiscal half of 2018 – a slight improvement from the $9m loss it posted in the second half of 2017.
Asia's overall earnings contribution also dropped to $10m in 2017 from $26m the previous year.
The sale of IAG's businesses in Malaysia, Thailand, Vietnam, and Indonesia, in deals that could amount to about $500m, could be completed by the third quarter, the sources told Reuters.
A spokeswoman for IAG in Australia said the insurer had announced plans to review its Asia strategy, not retreat from the region. She refused to comment on whether IAG had decided to exit those specific markets.
IAG owns a 49% stake Malaysian general insurer AmGeneral Holdings, a 99% stake in Thailand’s Safety Insurance, an 80% stake in Indonesian non-life insurer PT Asuransi Parolamas, and 63% of AAA Assurance Corp in Vietnam, Reuters said.
The insurance giant, which also operates in India and has a 16.9% stake in Bohai Property Insurance Company in China, gets most of its premium income in Southeast Asia from Malaysia and Thailand, one of the three sources said.
In February, IAG said its Asian operations are under review amidst a lack of buying opportunities to boost growth in a region attractive for its low penetration rates but which is also very competitive.
IAG's Malaysian venture could be appealing to firms, including Maybank Holdings’ insurance venture Etiqa, Japanese insurer Tokio Marine, and Chinese insurer Fosun, the people told the news agency, refusing to be named as they were not authorized to speak to the media.
Bids for IAG’s businesses in Thailand, Indonesia, and Vietnam were expected in a few weeks, one person said; while the divestment of the Malaysian business is likely to be completed in the current quarter or early third quarter, another person told Reuters.
This month, IAG said its Asian divestments is expected to deliver a “potential inflow” of capital.
The insurer did not provide financial details on the impact of the review, but according to Macquarie analysts, it will ultimately exit most markets in the region and free up about $800m of capital in the next few years, Reuters reported.