Bank Negara imposes 30% minimum local ownership in insurance firms

Sparking new life

• Regulatory-led amendments possibly leading to change in
ownership structure of insurance companies
• Viable options to foreign insurers would be an IPO, local
partner joint-ventures or divestment
• Growth prospects prevail; penetration rate still below
target
• Few investible options currently; IPO by foreign insurers



may potentially unlock up to RM3.4bn into the market
Enforcing 70% cap on foreign ownership. We gather
from press reports that Bank Negara Malaysia (BNM) is said to
be considering to strictly enforce the 70% foreign ownership
cap on insurers, which was issued back in 2009. This aims to
boost local participation in the industry. We understand that
the timeline could be fluid, and negotiations could be
managed on a case-by-case basis.

Six foreign insurers affected; some options available,
including an IPO route.


Our analysis of annual reports
shows that foreign insurers caught in this current conundrum

are AIA, AIG, Chubb, Great Eastern, Tokio Marine, and Zurich.









At the moment, these entities are wholly owned by their
respective parent companies. We believe that there are three
viable options for these companies to pare down their stakes:



1) List (IPO) 30% of their shares to the public; 2) JV with a
local partner; or 3) divest to local institutional investors (it was
reported that Kumpulan Wang Persaraan is actively seeking a
stake). Investment banks such as Maybank and CIMB could
benefit from such exercises. These insurance companies carry
a cumulative book value of c.RM11bn based on FY16
financials, and a divestment of a 30% stake is worth at least
RM3.4bn (1x BV) in terms of new market capitalisation to
Bursa. OCBC, which owns 87.75% of Great Eastern Holdings
(both listed on SGX) would be indirect proxies to position for
this theme.




Sources say central bank sent letters on the issue last week to wholly owned insurers including the local units of Japan's Tokio Marine Holdings Inc and Hong Kong's AIA Group Ltd.

bank-negara-malaysia KUALA LUMPUR: Malaysia’s central bank has asked foreign insurers to raise the proportion of local shareholders in their firms to at least 30%, under an initiative to lift domestic participation in the industry, people familiar with the matter said on Friday.


Foreign ownership of Malaysian insurers was set in 2009 at 70% – or more, if the buyer could help consolidate and rationalise the industry.
But some foreign insurers operating in the country could still be wholly owned by their overseas parent.


Bank Negara Malaysia last week sent letters to such wholly owned insurers requesting their foreign parents to reduce their stakes in line with regulation for domestically incorporated insurers, two people said.


Recipients included the Malaysian units of Japan’s Tokio Marine Holdings Inc and Hong Kong’s AIA Group Ltd, one of the people said.

The deadline to comply is June 2018, said one of the people, without elaborating on the consequences of non-compliance.

The people declined to be identified as they were not authorised to speak publicly on the matter. Bank Negara Malaysia and the local units of AIA and Tokio Marine did not respond to requests for comment.

The expected stake sales are a concern considering the size and timing, one of the people said. Malaysia has only a small number of large local funds and so insurers may have to compete for the same pool of institutional investors, the person said.

“These companies are very large,” the person said.

“How many Malaysian shareholders are there that will have the appetite and wallet to pick up this sort of stake, and invest this sort of money in that time frame?”

Moreover, regulation restricts firms to buying into no more than one insurer.
“Most of this 100% shareholding is a result of legacy ownership, rather than the foreign shareholders getting special leeway from the central bank,” said Brian Chia, Wong & Partners head of corporate, commercial and securities practice group.

This post has been edited by PLOUFFLE: Feb 5 2018, 08:30 PM

where you heard?

how many percent??

I O I group

Batu kawan group

Sime darby group


Fgv group


4 heavenly king

If listed like allianz,rakyat untung

If listed like allianz,rakyat untung