Malaysian sovereign wealth fund reports record gains, acquisition

Khazanah Nasional Berhad, the sovereign wealth fund of Malaysia, reported a 24.3% jump in the net value of its investment portfolio in 2012 to a record 86.9 billion Malaysia ringgit ($28.9 billion.)

Khazanah noted that its annual gains handily outpaced the 14.1% increase logged by the Malaysian stock market's Kuala Lumpur Composite Index.

In an annual review released Thursday, Khazanah cited its property development investments in Malaysia's southern-most state of Johor Bahru, bordering Singapore, as well as initial public offerings by portfolio companies IHH Healthcare Berhad and cable-TV network Astro Malaysia Holdings Berhad, as factors contributing to its annual gains.

Over the 12 months ended Dec 31, 2012, Khazanah made seven major new investments for a combined MYR6.2 billion, and 10 divestments that brought in a combined 4.8 billion ringgit, for a net gain of 2.1 billion ringgit.

The investment fund reported a profit before taxes of 2.1 billion ringgit for the year, and a dividend payout to the Malaysian government of 1.0 billion ringgit.

In a separate announcement, Khazanah and Sun Life Financial Inc. announced plans to acquire insurance joint ventures CIMB Aviva Assurance Berhad and CIMB Aviva Takaful Berhad for C$586 million (US$594 million) from Aviva PLC.

Aviva will sell its 49% stake in the joint ventures it set up with Malaysian financial group CIMB Group Holdings Berhad in 2007 to Sun Life Financial for US$242.9 million, according to an Aviva press release.

A separate Khazanah/Sun Life news release said Khazanah will buy an identical 49% stake in those joint ventures from CIMB, with CIMB retaining a 2% stake. The total purchase costs for Khazanah and Sun Life will come to C$293 million (US$296.8 million) apiece.

In a telephone interview, Kevin Strain, president of Sun Life Financial Asia, said one factor contributing to the gap between the US$242.9 million payment Aviva will receive and the US$296.8 million in payments Sun Life and Khazanah will each make is additional payments to CIMB for a 20-year exclusive distributionagreement.

With strong partners such as Khazanah and CIMB, the deal will provide Sun Life with a “significant opportunity” to expand into a Malaysian market that's “very developed” but still underpenetrated in terms of insurance services, Mr. Strain said. The move is a key step in Sun Life's goal of extending its reach in Southeast Asia, with Malaysia to become the seventh market in Asia for the company, he said.

The deal is expected to close during the first half of 2013.