Report: Insurance giants still looking for local buyers

AFP pic
AFP pic

PETALING JAYA: Some international insurance companies are said to be scrambling now in trying to beat a deadline set by Bank Negara Malaysia (BNM) on ownership of their Malaysian operations, South China Morning Post reported.

In June last year, the central bank asked foreign insurers to raise the equity of local shareholders in their firms to at least 30%, under an initiative to lift domestic participation in the industry.

Foreign ownership of Malaysian insurers was set in 2009 at 70%. However the stake could be even higher, if the buyer could help consolidate and rationalise the industry.

However, some foreign insurers operating in the country were still allowed to be wholly owned by their overseas parent. The new directive from BNM changes that effective June this year.

“BNM wants to enforce the foreign ownership cap due to pressure from local Malaysian insurance companies. The foreign ownership cap will help local firms to compete.

“These foreign insurance companies must sell 30% of their Malaysian insurance arms to local partners or list the stakes on Bursa Malaysia by the end of the second quarter,” a former Malaysia-based insurance executive who declined to be named told the Hong Kong-based daily.

He added that most foreign companies will be able to meet the deadline.

The foreign-owned insurance companies affeced by the ruling include Great Eastern, Prudential, AIA and Tokio Marine.

The Wall Street Journal had reported earlier this month that the Employees Provident Fund (EPF) was in talks to acquire a minority stake in the local operations of Singapore-based Great Eastern Holdings. The deal was estimated to be worth US$1 billion (RM3.9 billion).

Another source told SCMP that some insurance firms are talking to bankers to arrange for local partners, while others are mulling over the possibility of going public.

“It would be disappointing to see Malaysia tighten controls on foreign ownership. Mainland China is now doing the opposite as it announced in November a plan to remove the cap on foreign ownership in five years,” the source was quoted as saying.

According to SCMP, Malaysia is an attractive growth market for financial services, with a young population and an insurance penetration rate of just 55%.

Meanwhile, German insurance giant Allianz said it already complies with the ownership cap having been listed on Bursa Malaysia since 2007. The company now owns around 66.4% of Allianz Malaysia Berhad.

“As a global financial services leader, Allianz complies and fulfils regulations set by local authorities in the markets we operate in.

“We continue to be positive about the growth potential in Malaysia and remain fully committed to serving our customers and stakeholders in this key market,” a company spokesman was quoted as saying.

However, the Hong Kong-listed AIA was not willing to reveal what it plans to do to meet the deadline on having at least 30% local ownership of its operations in Malaysia.

“We own 100% of our life insurance operation in Malaysia. We are not in discussion with any parties to reduce our stake in Malaysia,” a company spokesman told SCMP.