Foreign Firms to Sell Large Stakes in Malaysian Insurers
19 September 2017 - 1:55PM
Dow Jones News
By Yantoultra Ngui and P.R. Venkat
Several foreign insurers are preparing to sell large stakes in
their Malaysian operations to comply with a central-bank mandate
requiring the country's insurance companies be at least partially
owned by local players, according to people familiar with the
matter.
British life insurer Prudential PLC and Japan's Tokio Marine
Holdings Inc. are talking to bankers about how to sell close to a
third of the shares in their Malaysian subsidiaries, the people
said. The options being considered include strategic stake sales or
initial public offerings in Malaysia.
The share sales by these and other foreign insurers could raise
almost $3 billion in total over the next nine months, one of the
people said.
Foreign insurance companies are facing a June 2018 deadline to
comply with the rules, which were set by Bank Negara Malaysia, the
country's central bank.
Many insurers started wholly-owned subsidiaries in Malaysia
years ago on the understanding that they would eventually comply
with a 2009 rule that capped foreign ownership of local insurance
companies at 70%. That means at least 30% of insurance companies
have to be held by domestic investors. The government earlier
granted various foreign insurance companies exemptions from the
rule.
In July, the central bank said foreign insurers operating in
Malaysia will need to honor the promises they made when they
originally applied for entry into the market. It said it "expects
adherence to these agreements and will play a facilitative role to
ensure these commitments are met."
Prudential, which has operated in Malaysia since 1924 through a
subsidiary called Prudential Assurance Malaysia Bhd., has yet to
decide on the structure of its share sale, people familiar with the
matter said. A 30% stake sale of its unit could fetch close to $1
billion, the people said. Prudential is the third-largest life
insurance company in Malaysia based on its net premiums.
Singapore's Great Eastern Holdings Ltd., one of Malaysia's
oldest life insurers and its second-largest by net premiums, has
engaged at least one Malaysian bank to explore similar moves, which
one person familiar with the matter said could also raise close to
$1 billion.
Separately, Tokio Marine is considering an IPO in Malaysia that
could raise $100 million, while Switzerland-based
property-and-casualty insurer Chubb Ltd. is also looking to sell a
30% stake that could raise up to $50 million, the people said.
These firms also currently have no domestic shareholders.
A Prudential spokesman said the company remains committed to
growing its business in Malaysia, but declined to comment further.
A Tokio Marine representative said the company is currently
exploring options for complying with local rules, but also couldn't
comment further. Great Eastern and Chubb declined to comment.
Buyers of the foreign insurance-company stakes could include
Malaysia's largest state pension fund, the Employees Provident
Fund, as well as state asset manager Permodalan Nasional Bhd.,
investment bankers say.
An EPF spokeswoman said the company was "aware of the local
insurance landscape, and should the right opportunity arise, we
will go through the EPF investment decision framework to ensure
that it fits EPF's risk-return profile." PNB didn't respond to
requests for comment.
Write to Yantoultra Ngui at yantoultra.ngui@wsj.com and P.R.
Venkat at venkat.pr@wsj.com
(END) Dow Jones Newswires
September 18, 2017 23:40 ET (03:40 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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