Great Eastern in talks for sale of Malaysia unit to EPF for up to $1b

EPF chief executive officer Shahril Ridza Ridzuan

Singapore-based insurer Great Eastern Holdings, the insurance arm of OCBC Bank, is in discussions with Malaysia’s Employees Provident Fund (EPF) and Retirement Fund Inc (KWAP) regarding the sale of a minority stake in the latter’s Malaysian insurance unit, said a report by the Wall Street Journal.

According to DBS Vickers Securities, OCBC holds 87.75 per cent of Great Eastern, which contributes an estimated 15 per cent to OCBC Group’s EBITDA as at September 2017.

Data compiled by Willis Towers Watson indicates that the EPF has assets under management estimated at $165.4 billion.

Malaysia has a life insurance penetration rate estimated at 55 per cent since 2010 – below the central bank’s target of 75 per cent – and Malaysia statistics department forecasts that the country is set to see people aged between 15 and 64 years of age account for 66 per cent of the overall population in 2040, representing a growing young and insurable population.

Citing sources familiar with the matter, the WSJ claims that “Negotiations are in early stages, with no certainty of a transaction”, with Great Eastern also exploring an initial public offering (IPO) on the Bursa Malaysia if no private transaction involving the unit is reached.

However, even an IPO whose share sale could raise almost $3 billion in IPO proceeds on the Bursa Malaysia could see the participation of the EPF, though with a lower stake in the Malaysian unit of the insurer.

In September 2017, WSJ had reported that Great Eastern, among other insurance majors, was exploring share sales. In 2009, Bank Negara Malaysia granted foreign insurers until end of June 2018 to reduce their stakes in local firms to 70 per cent. Failure to meet the local ownership law by the middle of this year will result in punitive action, with licence suspension one possible penalty.

Bloomberg reported last year that Prudential, Singapore’s Great Eastern and Japan’s Tokio Marine Holdings Inc were among the insurance firms exploring plans to reduce their equity interest in their Malaysian units.

The aggregate value of Malaysia’s four major insurers – Great Eastern, Tokio Marine, Prudential and AIA – amounts to RM130 billion ($33.2 billion) and comes at a time when Bank Negara seeks to consolidate the fragmented sector in the life and general insurance segment. As at 5 February 2018, insurance fund assets account for 5.2 per cent of Malaysia’s financial sector.

Also Read:

Malaysia’s PNB, EPF to acquire London’s Battersea building for $2.2b

Malaysia’s EPF sells London office property to Chinese Estates for $226m

Malaysia’s EPF mulls direct investments in natural resources in bid to diversify

Malaysia’s EPF buys 49% in OSK’s Australia project for $115.9m

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.