B40 option neutral for insurance sector

> Bank Negara Malaysia declines to comment on change in policy on foreign players’ stakes

PETALING JAYA: Finance Minister Lim Guan Eng's announcement on Monday that foreign insurers would be given the option to participate in the B40 Health Protection Fund instead of paring down its stake in local outfits, is expected to have a neutral impact on the insurance industry due to the illiquid market, according to analysts.

Lim said in an interview with BFM that participation in the B40 Health Protection Fund is an alternative for foreign insurers looking to maintain their holdings in locally incorporated insurers.

“We’re giving another option. Instead of divesting the 30% stake held by several parties, we’re now giving an alternative so that assistance can be given to the B40 group,” he said in an interview with BFM.

Lim’s comments came after Singapore-listed Great Eastern Holdings Ltd, which fully owns the insurer here, confirmed it was putting in RM2 billion as seed funding for the initiative. This was after Great Eastern had initially said it was still mulling over its contribution to the fund and no decision had been made on its participation in response to Lim's announcement during the Budget 2019 reading.

Lim had named Great Eastern as the provider of a RM2 billion seed fund for the programme in his budget speech on Nov 2.

Bank Negara Malaysia declined to comment in response to queries regarding the change in policy to require foreign insurers to cut their stakes to a maximum of 70%.

Bank Negara governor Datuk Nor Shamsiah Mohd Yunus had in August this year reiterated the central bank's stand that foreign insurers must keep to their promise of cutting their interests, but accorded more flexibility for the time they took to do so, depending on the route they took to accomplish this. She did away with a blanket compliance date for the exercise.

An insurance analyst told SunBiz that even if the foreign insurers choose to go for listings, there is not much impact on the insurance sector as bulk of the shares are still tightly held by certain investors.

Moreover, she said, the market has less interest in the insurance industry given that it is not easy to gauge the value of an insurer, except for longterm investors who are looking for dividend payout.

Nonetheless, she is positive that the Health Protection Fund will help lessen the burden of the poor.

Another analyst said it is “business as usual” for the insurance industry as unlisted entities such as AIA and Great Eastern do not provide much impetus to the overall market.

The requirement for foreign insurers to pare down their stakes in local units is to prevent massive outflows of money and dividends from the country.

According to Bank Negara, foreign insurers repatriated about RM16.5 billion between 2008 and 2017 in the form of dividends.

A total of 11 insurers in Malaysia are wholly owned by foreign companies.