The enforcement of this requirement could lead to a spate of M&A activities in the insurance sector. Apart from selling stakes to local strategic shareholders to meet the requirement, foreign insurers may pursue the IPO option. Positive for investors but negative for existing insurance stocks.
The sector as a whole, it is positive on the listing of any foreign insurers, especially the three big players, on Bursa Malaysia as this would significantly expand the size of insurance sector. However, this would be negative for existing insurance stocks as their liquidity could be drained as a result. So far, there has been no indication that any of these companies intend to go public.
Nonetheless, it believes certain foreign insurers may consider listing on the Malaysian equity market to meet the minimum local shareholding requirement of 30%. It notes that there are 23 general insurers and 14 life insurers in Malaysia.
Market share is more evenly distributed in the general insurance segment in terms of 2016 annualised gross earned premium, with local players comprising 52.1% and foreign players accounting for 47.9%. However, foreign names dominate the life insurance sector, with total market share of 81.7% in 2016 vs. the 18.3% of local insurers. AIA, Great Eastern and Prudential have a combined market share of 66.7% (in terms of gross earned premium).
The estimate - the three big foreign life insurers in Malaysia would have total market capitalisation of RM19.1bil, of which RM10.9bil would be for AIA, RM4.1bil for GE Life (GEL) and RM4.1bil for Prudential. If their major shareholders sell a 30% stake in each, total proceeds raised would be RM5.7bil.
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