LISTING OPTION
Local units can be listed on Bursa to meet Bank Negara shareholding requirement
FOREIGN insurers can choose to list their local subsidiaries on Bursa Malaysia to comply with a 30 per cent local
shareholding ruling, say analysts.
FOREIGN insurers may opt to list their local units on Bursa Malaysia to comply with a minimum 30 per cent local shareholding requirement, said analysts.
Bank Negara Malaysia recently reinforced the requirement that foreign-owned insurers must have local shareholding of at least 30 per cent by June next year.
Analysts said apart from selling stakes to local strategic shareholders to meet the requirement, foreign insurers may also pursue initial public offerings (IPOs).
CIMB Research said the life insurance market is currently dominated by three foreign players, namely AIA, Great Eastern and Prudential.
Their Malaysian units have a combined market share of 66.67 per cent in gross premium.
The companies would attract keen interest from investors if they list on Bursa Malaysia at reasonable valuations, said CIMB Research.
It estimated the three companies to have a total market capitalisation of RM19.1 billion based on a price-to-book value of 2.3 times. In this case, a sale of 30 per cent stake in each of these companies would raise total proceeds of RM5.7 billion.
Currently, there are seven insurance stocks on Bursa Malaysia, most of which have small market capitalisation. The biggest, by market capitalisation, is LPI Capital Bhd, with RM1.44 billion.
The combined market capitalisation of the seven insurance stocks is RM2.85 billion, smaller than CIMB Research’s rough potential market capitalisation estimate of between RM4 billion and RM10 billion each for units of AIA, Great Eastern and Prudential.
“Apart from scouting for local strategic shareholders, we think some of the foreign insurers may opt for IPOs on Bursa Malaysia. We are excited by the prospect of the big foreign insurers being listed as this would increase the number of big-cap insurance stocks on the stock market and significantly raise total market capitalisation of the insurance sector,” said CIMB Research.
There are 23 general insurers and 14 life insurers in Malaysia.
The market share is evenly distributed in the general insurance segment, in terms of last year’s annualised gross earned premium, with local players comprising 52.1 per cent and foreign players accounting for 47.9 per cent.
However, foreign names dominated the life insurance sector last year, with a market share of 81.7 per cent.
Meanwhile, MIDF Research said foreign insurers should able to meet the deadline in June next year via strategic stake sales instead of the IPO route.
“Some (stake sale) deals may be finalised by yearend, but we expect some of the sales to spill over into the first quarter of next year due to the complexity of the risk assessment and negotiations.
“Foreign insurers are unlikely to opt for IPOs as they would have to go through a lengthy process.
“In the case of Tokio Marine Insurans (M) Bhd, a listing on Bursa Malaysia — if any — would probably be completed later than June next year. The listing of Tokio Marine Insurans will spur more public and investor interest in insurance stocks,” it added.
Tokio Marine Holdings Inc’s Tokio Marine Insurans is said to be considering an IPO in Malaysia that could raise some US$100 million (RM418 million).
Currently, only Allianz SE’s Allianz Malaysia Bhd and Manufacturers Life Insurance Co’s Manulife Holdings Bhd are traded on the local bourse.
It was reported that Singaporebased Great Eastern had engaged at least one local bank to explore a stake sale in its Malaysian subsidiary, which could fetch up to US$1 billion.
A 30 per cent stake sale in Prudential Malaysia could also raise a similar amount.
United States-listed property and casualty insurer Chubb Ltd is also looking at a 30 per cent stake sale or a domestic IPO for Chubb Insurance Malaysia Bhd, with the stake sale said to reap at least RM200 million.