Foreign Firms to Sell Large Stakes in Malaysian Insurers

By Yantoultra Ngui and P.R. Venkat Features Dow Jones Newswires

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.

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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."

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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

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)