KIMB Disposal

It has been announced today that Kurnia Insurance (M) Bhd (KIMB), the biggest Motor Insurance Company in Malaysia will be sold to AmG (JV company between Am Group (51%) and Australia Insurance Group - AIG (49%) ). it is speculated that the sale price will be at 2.5 to 3 times of KIMB's book value (BV) of RM720 mil. Recent sales of insurance business in Malaysia is transacted at following price:

1. Jerneh Ins sold to ACE - 2.24 times BV
2. Berjaya Sampoe Ins sold to Japanese - 3.3 times BV
3. Pacific Ins sold to Fairfax - 1.5 times BV
4. MAA Ins sold to Zurich - 1.35 times BV

KIMB being the biggest motor insurer should command a BV above 2x based on the recent transaction. The speculated price of 2.5x to 3x is fair. Motor insurance business is a tariff business where the premium charged is controlled by BNM. The premium rate has been not raised for a very long time. The emergence of buyer at 2.5 x BV is an indication that the motor insurance premium is going up soon.

A quick analysis of potential upside for short term gain:

















There is a potential speculative upside of another 50% or 30sen/share. Good luck.