KWAP IN TALKS TO BUY STAKE IN PRUDENTIAL MALAYSIA?

Details of possible deal could be finalised as early as this month, say sources

PRUDENTIAL Plc’s Malaysian unit is in talks with the country’s No. 2 pension fund to sell a 30 per cent stake valued at about US$435 million (RM1.7 billion), said people with knowledge of the matter, as overseas insurers race to comply with new foreign ownership rules.

The discussions between Prudential Assurance Malaysia Bhd, a wholly-owned unit of the British insurer, and Retirement Fund Inc (KWAP) were not exclusive and details of a possible deal could be finalised as early as this month, said the people.

Foreign insurers are required to cut their stakes in their local units to 30 per cent to abide by a directive announced by Bank Negara Malaysia last year, under an initiative to lift domestic participation in the industry.

That has prompted a rush from the likes of Prudential, Great Eastern Holdings, Tokio Marine Holdings and Zurich Insurance in Malaysia to find ways of divesting stakes and submit plans to the regulator before a June deadline.

The Malaysian unit of Britain’s largest insurer by assets is one of the leading foreign life insurers in Southeast Asia’s third-biggest economy.

KWAP chief executive officer Datuk Wan Kamaruzaman Wan Ahmad said the fund had submitted an offer for the Prudential unit’s stake, but declined to give details.

Prudential did not comment on the discussions but said it was committed to its local business.

There was no certainty that Prudential’s talks with KWAP would result in a deal, and the former could also weigh a listing on Bursa Malaysia to divest the stake, said the people.

Prudential’s Malaysian unit, whose net premium earnings rose 3.3 per cent to RM3.1 billion in the six-month period ended June last year, had an embedded value of about RM5.5 billion, said one of the people.

That values a 30 per cent stake in the unit at RM1.7 billion.

Embedded value is the net asset value of an insurer plus the present value of potential future profits from existing life and health insurance contracts.

Besides Prudential, other foreign insurers in Malaysia are also busy finalising options for reducing their stakes.

Great Eastern was in talks with Employees Provident Fund to sell a 30 per cent stake in its whollyowned Malaysian unit, said people familiar with the matter.