Singapore-listed insurer Great Eastern Holdings has confirmed reports that it is studying options in relation to the possible sale of a minority stake in its Malaysian unit to comply with foreign ownership rules.
"The assessment (of possible options) is preliminary at this stage and shareholders are advised that there is no certainty that any agreement will be entered into," the insurer said in a Singapore Exchange filing yesterday.
GE has reportedly engaged at least one Malaysian bank to explore selling a large stake in its operations over the Causeway - Great Eastern Life Assurance (Malaysia) - for as much as US$1 billion (S$1.35 billion).
The move is a likely response to a central bank rule - in place since 2009 but not enforced - that requires foreign insurance firms in Malaysia to have at least 30 per cent held by domestic investors.
Affected companies are facing a June 2018 deadline to comply with the rules, which were set by Bank Negara Malaysia, according to media reports.
Both The Straits Times and The Business Times published reports about the matter on potential buyers for shares in foreign insurers facing the same issue. They would likely be local institutions such as the Employees Provident Fund, Malaysia's largest state pension fund, and Malaysian sovereign wealth fund Permodalan Nasional.
GE said shareholders "are advised to refrain from taking any action in respect of their shares, which may be prejudicial to their interests, and to exercise caution when dealing in the shares" of GE.
It will make the relevant disclosures when it is appropriate, it said.
Based on Great Eastern Life Assurance (Malaysia)'s annual report, the unit contributed about 40 per cent to GE's pre-tax profit for last year - about 6 per cent of GE parent company OCBC group's pre-tax profit, said a DBS research report on Wednesday.
OCBC holds 87.75 per cent of GE, which on average contributes about 15 per cent to the bank's pre-tax earnings.
GE is one of Malaysia's oldest life insurers and reportedly its second-largest by net premiums.
The Wall Street Journal, citing Britain's Prudential and Tokio Marine, noted that "the share sales by these and other foreign insurers could raise almost US$3 billion in total over the next nine months".