Insurance Australia Group (IAG) through its Malaysian joint venture AmG Insurance has inked a conditional agreement to acquire Kurnia Insurans (Malaysia) for $495m.

Of the total value of the deal, IAG will contribute 49% or 242.76m in line with its ownership of AmG and the purchase price will be funded from internal resources.

The deal is believed to get earning per share accretive within one year of completion.

IAG managing director and CEO Mike Wilkins said that the acquisition will make AmG the largest general insurer in Malaysia, with 13% of Malaysia’s general insurance market and a clear number one position in motor insurance.

"Since IAG entered Malaysia’s insurance market in 2006, we’ve forged a successful partnership with AmBank Group, narrowed our focus to general insurance and increased our joint venture ownership from 30% to 49%. AmG has performed consistently well, and achieved a strong insurance margin of 19.4% in the first half of IAG’s 2012 financial year," Wilkins said.

"This is another important step in IAG’s strategy to boost its Asian footprint, contributing to the Asia division’s target of representing 10% of IAG’s gross written premium by 2016, on a proportional basis."

IAG Asia division CEO Justin Breheny said the acquisition of Kurnia was consistent with the division’s strategy of pursuing consolidation opportunities in its established markets, where good long term growth prospects exist.

"Kurnia is a top four general insurer in Malaysia, and the largest motor insurer. It has a well recognised brand for general insurance, around three million customers and a nationwide network of branches and agents," Breheny said.

Upon the completion of the merger, AmG’s annual gross written premium will more than double to over RM1.7 billion ($547m), while expanding its distribution base and product service offering, said the firm.

According to an estimate, Malaysian general insurance market grew by 7.8% in 2011, backed by a strong economy which is expected to grow around 4-5% in 2012.