Overseas insurers including Prudential Plc are planning to sell stakes in their Malaysian units, in deals that could raise at least a combined US$2 billion and lead them to comply with foreign ownership limits, reported Bloomberg citing people with knowledge of the matter.
Prudential has asked banks to pitch for a role advising on a domestic initial public offering of its Malaysian unit, an option it is considering alongside a potential stake sale to an investor, according to the people.
Singapore’s Great Eastern Holdings is also exploring cutting its local holding to 70% through a sale or IPO, the people said, asking not to be identified because the details are private. A sale of a 30% stake in Great Eastern Life Assurance (Malaysia) could raise about MYR5 billion ($1.2 billion), while the disposal of a similar stake in Prudential Malaysia Assurance would fetch at least MYR3 billion , the people said.
Meanwhile, Tokio Marine Holdings has appointed a bank to advise on options for cutting its stake in its local unit, which could raise around MYR1 billion, according to one of the people.
Foreign insurers have until end of June 2018 to reduce their holdings in local firms to the 70% ceiling.
Malaysia's central bank, Bank Negara, said earlier this year that foreign shareholders of local insurers must honour their commitment in maintaining specified levels of domestic shareholding.
Reuters reported that Bank Negara sent letters to wholly owned insurers last month requesting their foreign parents to reduce their stakes in line with regulations for domestically incorporated insurers.
Foreign ownership of Malaysian insurers was set in 2009 at 70%. Higher ownership levels could be allowed on a case-by-case basis for companies that can facilitate consolidation and rationalisation of the insurance industry, according to a statement at the time.
However, Bank Negara Governor Muhammad Ibrahim warned last year that foreign insurers “need to contribute more to justify their presence” in the Malaysian market.