KWAP, EPF lead battle for insurers

Asian growth: A huge advertising board for British insuruer Prudential on the top of a building in Hong Kong. Prudential said seven places, including China, Hong Kong and Singapore, clocked double-digit growth.

PETALING JAYA: The battle for stakes in Malaysia's three largest life insurance companies has picked up the pace.
 
Sources said Retirement Fund Inc (KWAP) has submitted its bid to buy a stake in foreign-owned Prudential Assurance Malaysia Bhd while the Employees Provident Fund is looking at taking up a block in Great Eastern Life Assurance (M) Bhd.
 
Between the two, KWAP is at a more advanced stage of negotiation and hopes to see some positive development soon.
 
“They are hoping to see some concrete outcome from negotiations by the end of this month. The talks are between KWAP and the principals in London,” said sources.
 
Last week, Bank Negara reminded insurance companies to "honour their commitments" with regards to rationalising their shareholding equity.

Towards this end, under the Financial Services Act (FSA) foreign insurance companies are allowed to hold up to 70% equity interest in local insurance companies.
 
Foreign insurers have until June 2018 to meet a 30% local shareholding ruling set by the central bank as part of an initiative to lift domestic participation in the industry.

Three leading life insurers – AIA Bhd, Great Eastern and Prudential – are wholly owned by foreign companies.
 
According to CIMB Research, the three life insurance companies had 81.7% market share in 2016.
 
According to sources, KWAP was in talks with two insurance companies, namely Prudential Assurance and Great Eastern Life.
 
“However Prudential has so far been more receptive to KWAP’s offer,” a source said.

As for Great Eastern, it is learnt that the Singapore-based insurer had always wanted an investor like the EPF if it should be required to reduce its shareholding.
 
“The foreign ownership threshold was set at 70% in 2009 when the FSA came into force,” said an industry official.
 
The official said that at the time the view was that any higher threshold of foreign shareholding would be reviewed by Bank Negara on a case-to-case basis.
 
It was reported that Prudential PLC was looking to sell a 30% stake in Prudential Assurance to KWAP for US$435mil (RM1.69bil). If this report were true, it would value Prudential Assurance at RM5.63bil.

Last November, CIMB Research ascribed 2.3 times price-to-book (P/BV) for Prudential Assurance and valued it at RM4.1bil.

The research house said the P/BV of 2.3 times is based on past acquisitions of insurance firms in Malaysia.

CIMB also estimated that AIA would have a market capitalisation of RM10.9bil and RM4.1bil for GE Life.

There are four listed local insurance companies on Bursa Malaysia, namely LPI Capital Bhd with a market capitalisation of RM6.4bil, Allianz Malaysia Bhd valued at RM2.2bil, as well as Syarikat Takaful Malaysia Bhd and Tune Protect Group Bhd with market capitalisations of RM2.88bil and RM628mil, respectively.