Sanlam concludes agreement to acquire 49% of Pacific and Orient Insurance Co. Berhad

11 December 2012 Sanlam

South Africa based financial services group, Sanlam is pleased to announce that it has executed all agreements to acquire a 49% stake in Malaysian short term insurer Pacific & Orient Insurance Co. Berhad (POI) (the transaction) following recent approval b

The transaction is in line with Sanlam’s stated strategy to pursue profitable growth opportunities in selected emerging markets and represents Sanlam’s first step into the important South East Asia region.

Established in 1972, POI is wholly owned by P&O, which is listed on Main Board of the Bursa Malaysian Securities Berhad. POI’s business is predominantly focused on motorcycle insurance and the company has an approximate 40% market share in this segment, making it the largest motorcycle insurer in Malaysia. The country relies heavily on motorcycles as a mode of transport with approximately one motorcycle for every three people. New motorcycles sales are projected to grow by 10% per annum until 2015.#

Says Sanlam Emerging Markets Chief Executive, Mr Heinie Werth: “We are excited to partner with the POI team and look forward to exploring future growth opportunities together. This transaction is our first foray into the South East Asia region. We believe that this transaction will provide us with a platform to gain an understanding of the region and a footprint on which to expand.

“POI is an established entity with a robust business model and a strong market position. Motorcycle dealers deem it important to have a good insurance provider and it is compulsory for motorcycles to have insurance. This is supported by an extensive distribution network. We are confident that the company offers us a relatively low risk entry into the market and a platform for growth.”

POI has performed well over time due to its strong management team. In 2011, the company grew its profit after tax by 36% to Malaysian Ringgit 57 million (or approximately R160 million at the current exchange rate) and increased net underwriting margins to above 10%. Sanlam believes that the Malaysian business environment, where the regulator is encouraging international partnerships for local companies, will contribute to growth.

POI’s current management team will continue managing the business with Sanlam seconding staff to POI over time.

In recent years, the Malaysian economy has grown steadily, recording stronger than expected growth in the past two years. Real GDP grew 7.2% in 2010, 5.1% in 2011 and is forecast to be approximately 4% per annum up to 2015. Inflation ranged between 2.5% to 3.5% during the same period.

Malaysia’s total gross non-life insurance premiums were around US$5.0 billion in 2011 and grew by 12% (in dollar terms)*. Motor products, including motorcycles, account for 47% of the conventional non-life insurance market^. The country has a high ratio of number of motorcycles per person at 31.4%.**

Chan Thye Seng, Managing Director and Chief Executive Officer said: “We look forward to the partnership with Sanlam and the technical expertise that they will add in exploring future growth opportunities.”

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