KUALA LUMPUR: Malaysia will require overseas insurance firms to jettison at least 30% of their domestic businesses via strategic stake sales or local initial public offerings by the end of June in order to comply with new foreign ownership rules. Companies from AIA Group Ltd to Prudential Plc and Japan’s Tokio Marine Holdings Inc are beginning to feel the heat.
The South-East Asian nation’s pension giant Employees Provident Fund said earlier this month that it’s in talks to buy a stake in the Malaysian unit of Singapore’s Great Eastern Holdings Ltd, while Britain’s Prudential and Tokio Marine are also in discussions with bankers.
Relinquishing control won’t be a happy situation for many international firms. Although insurance penetration in the nation has remained flat at around 55% since 2010, Malaysia’s relatively young population 66% are between the age of 15 and 64 means that figure is sure to grow.
And while Malaysia comprised just 5% of AIA’s operating profit after tax in the first half of 2017, it’s the Hong Kong group’s fifth-largest single market. Foreign insurance firms also have no choice but to sell to local companies, which essentially limits the pool of buyers to four main parties, all of which are deep-pocketed state-owned entities.
There’s Employees Provident Fund, Kumpulan Wang Persaraan (Diperbadankan), or KWAP, Permodalan Nasional Bhd and sovereign wealth fund Khazanah Nasional Bhd.
A better option may be the IPO route, as investors have tended to prize listed insurers over the broader market.
