EPF in talks to buy stake in Great Eastern

KUALA LUMPUR: Singaporebased insurer Great Eastern Holdings Ltd is in exclusive talks with Malaysia’s largest provident fund to sell it a minority stake in its Malaysian insurance unit, a deal that could fetch as much as US$1bil, according to a source.

The talks with the Employees Provident Fund (EPF) is part of Great Eastern’s strategy to meet a Malaysian central bank deadline, set for June, mandating that insurers operating in the country are at least partially owned by locals. A stake in Great Eastern Life would allow EPF to ride on the growth prospect of Malaysia’s insurance sector.

Great Eastern’s Malaysia unit, Great Eastern Life Assurance (M) Bhd, is the oldest insurance company in the country. It had over 3 million policies in force and a network of 17,000 agents in Malaysia at the end of 2016, according to its website.

State-owned EPF managed RM771.2bil worth of investment assets as of last September, according to Willis Towers Watson.

Negotiations are in early stages, with no certainty of a transaction, the source said. Great Eastern could look to list its insurance unit through an initial public offering in Malaysia if no deal is reached, the source said.

Even if the deal fails through, EPF can still opt to partake in the potential listing of Great Eastern Life, albeit with a lower stake, he said.

Since the central bank’s mandate came down, foreign insurance firms operating in Malaysia have been looking at ways to trim stakes in their local units, either through sales of a minority stake to Malaysian firms or via an IPO. The firms have to bring down their stakes in their local insurance units by at least 30%, according to the bank.

The source said such share sales could raise almost US$3bil.