Hong Kong's FWD to buy HSBC's stake in Malaysian insurance venture — sources

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HONG KONG/KUALA LUMPUR (Aug 28): Hong Kong-based insurer FWD Group has agreed to buy HSBC Holdings Plc's stake in a Malaysian insurance joint venture as part of a plan to expand its presence in Asia, three people familiar with the matter said.

FWD, owned by tycoon Richard Li, is acquiring the British lender's 49% stake in HSBC Amanah Takaful (Malaysia) Bhd initially, with plans to ultimately own a majority by buying some shares from the existing partners, they said.

The deal shows that foreign insurers are keen on Malaysia, drawn by its strong economic growth, rising middle-class income and low insurance penetration, despite lingering regulatory uncertainty over the insurance sector's foreign ownership rules.

The exact value of the deal was not immediately clear, with one of the people putting it at less than US$100 million. It is expected to be completed by end of this year, subject to approval by Bank Negara Malaysia (BNM).

A foray into the Southeast Asian country by FWD will add to its Asian market footprint that already covers Indonesia, Japan, Singapore, the Philippines, Thailand, and Vietnam, besides its home market.

HSBC, which has a strong Asian insurance business presence, has been looking to exit the Malaysian insurance joint venture in the last one year to focus on its core banking offerings, two of the people said.

Last year, the Malaysian unit of German insurer Allianz SE said it had discontinued talks with the shareholders of HSBC Amanah Takaful to acquire up to 100% stake in the company.

Malaysia's JAB Capital Bhd owns 31% in the venture, while Employees Provident Fund Board of Malaysia (EPF) controls 20%, according to HSBC Amanah Takaful's website.

FWD and HSBC declined to comment. A spokeswoman for BNM, which is also the country's central bank, said it does not comment on individual firms, while JAB Capital and Malaysia's largest pension fund EPF did not reply to requests for comment.

The people declined to be named as the deal was not public yet.

Ownership cap

Foreign insurers were caught offguard last year when BNM said it would enforce its 2009 rule, setting a 70% cap on foreign ownership of local insurance businesses.

The directive had sent several foreign insurers in Malaysia scrambling to sell down their stakes. It is not clear if or when the rule will be enforced.

Takaful refers to Islamic insurance products. In financial dealings, takaful firms follow religious guidelines including bans on interest and monetary speculation, and a prohibition on investing in industries such as alcohol and gambling.

Growth in the takaful business in Malaysia, the world's second largest Islamic insurance market, is outpacing the growth of the conventional insurance sector, helped by government efforts to reach out to the mass-market, Fitch Ratings said in a report in January.

Family and general takaful business grew by 7.5% and 5.9% respectively in the first half of last year, compared with 5.2% growth and 1.8% drop in life and general insurance in the country, the ratings agency said.

Two of the people said the Malaysian deal would bring FWD, which was set up in 2013, a step closer to a stock market listing, plans for which are in early stages and likely to be worked out over the next two years.

FWD declined to comment on its listing plans.