Chubb looks at cutting stake in insurance unit

KUALA LUMPUR: Chubb Ltd, the US-listed property and casualty insurer, is considering paring its stake in its Malaysian insurance unit to comply with a 70% limit on foreign ownership, according to people with knowledge of the matter.

Bloomberg reported that Chubb has picked Maybank Investment Bank to advise on a possible stake sale or domestic initial public offering, said the people, who asked not to be identified as the process is private.

“The 30% stake could fetch at least RM200mil,” said one of the people. The wire reported earlier that foreign insurers are said to plan US$2bil of Malaysian deals.

Chubb declined to comment in an e-mailed statement, while a spokeswoman for Maybank declined to comment. Chubb Insurance Malaysia Bhd has a network of 23 branches and 2,000 agents, according to its website.

Meanwhile, it was reported last month that the Retirement Fund Inc (KWAP), Malaysia’s second-largest pension fund, was considering investing in foreign-owned insurance companies.

Based on a Bernama report, KWAP has narrowed its options to three foreign-owned insurance companies and was appointing an adviser on the matter, according to chief executive officer Datuk Wan Kamaruzaman Wan Ahmad.

“We are at the point of appointing an investment bank as our adviser ... The companies are Great Eastern, Prudential and AIA,” he said.

Bank Negara has instructed foreign insurers – Tokio Marine Holdings Inc, AIA Group Ltd, Great Eastern Holdings Ltd and Prudential – to comply with the foreign ownership rule, which requires overseas insurers to increase local shareholding to at least 30%.

The central bank reportedly in late June sent letters to such wholly-owned insurers requesting their foreign parents to reduce their stakes, in line with regulation for insurers incorporated domestically.

In 2009, Malaysia liberalised its foreign ownership rules that allow foreign equity participation in insurance companies and takaful operators to increase from the 49% limit to 70%.

At that time, Bank Negara said a higher foreign equity limit beyond 70% for insurance companies would be considered on a case-bycase basis for players that can facilitate consolidation and rationalisation of the domestic insurance industry.

RAM Rating Services Bhd recently noted there were 11 Malaysia-incorporated conventional insurers that were fully-owned by foreign firms.

Japan’s Tokio Marine Holdings Inc, together with two of the largest insurance companies in Malaysia – AIA Group Ltd and Great Eastern Holdings Ltd – are among the foreign companies that have wholly-owned general insurance and life insurance operations locally.