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* Third insurance deal in Malaysia in past year
* Controlling stake in AmLife Insurance worth $350 mln
* Zurich, HK tycoon Richard Li, Japanese firms also bidding
By Denny Thomas and Saeed Azhar
HONG KONG/SINGAPORE, May 9 (Reuters) - Manulife Financial Corp and Metlife Inc are among companies that have made bids for a controlling stake in the life insurance unit of Malaysian lender, AMMB Holdings Bhd, the third insurance deal in the country over the past year.
Zurich Insurance Group, Hong Kong tycoon Richard Li's Pacific Century Group, ACE Ltd and two Japanese insurers have also submitted first-round bids to buy up to 70 percent in unlisted AmLife Insurance Bhd worth $350 million, people familiar with the deal told Reuters. Foreign ownership in Malaysian insurers is capped at 70 percent.
The deal highlights how some sellers are cashing out while the demand for insurance assets is strong. Malaysia is Asia-Pacific ex-Japan's ninth-biggest insurance market by premiums and a young and growing population makes its attractive to global and regional companies keen to get a foothold, analysts say.
The hot, regional insurance M&A market has been spurred by Southeast Asia's rising personal incomes and the industry's strong growth potential. Asia-Pacific insurance M&A set a record of $30.5 billion worth of deals last year, driven by the activity in places such as Malaysia and Thailand.
Officials with AMMB Holdings declined comment. All suitors mentioned in the story declined comment. The sources declined to be identified as the sale process is confidential.
AmLife earned 4.7 million ringgit ($1.5 million) net profit for six-months ended September 2012, on 188 million ringgit net premiums, according to the company's financial statements.
The business had an embedded value (EV), which measures the value of an insurance company based on future earnings from current policies, of about 650 million ringgit and it could be sold for 2.5-3 times EV, people said.
The last insurance deal in Malaysia was struck at 3.2 times EV, when sovereign wealth fund Khazanah Nasional and Sun Life Financial Inc acquired the insurance joint venture of CIMB Group Holdings and Aviva Plc for $597 million.
Malaysia's life insurance industry has grown 13.5 percent in the past three decades and its ratio premium-to-GDP reached a healthy 3.3 percent compared with nearly 10 percent for Hong Kong and more than 4 percent for Singapore, according to Swiss Re estimates.
Given the country's strong economic growth, life insurance premiums in Malaysia are set to grow 5.4 percent in 2014, compared with world average of 3.9 percent, Swiss Re said.
"Malaysia's life insurance penetration rate has plenty of room for further expansion, particularly among the indigenous Malay population with a relatively young population and increasing household income," Credit Suisse said a recent report.