This article first appeared in The Edge Financial Daily on December 13, 2019
KUALA LUMPUR: RHB Bank Bhd announced yesterday that it has called off discussions to sell its entire 94.7% stake in its insurance arm, RHB Insurance, to a unit of Japan’s Tokio Marine Holdings Inc, Tokio Marine Asia Pte Ltd (TMA).
“RHB Bank wishes to announce that after much negotiations and deliberations, both the company and TMA have not been able to reach an agreement on mutually acceptable terms and conditions for the proposed disposal,” RHB Bank said in a stock exchange filing yesterday.
“Accordingly, RHB Bank and TMA have mutually agreed to cease negotiations, and will not proceed with the proposed disposal.”
The proposed sale to TMA, if it had gone through, would have seen the merger of RHB Insurance and Tokio Marine Insurans (M) Bhd — TMA’s general insurance arm — into the second largest general insurer group in the country, with combined gross written premiums of approximately RM1.71 billion and a market share of nearly a tenth.
Discussions for the proposal was first announced by RHB Bank at end-July, when the banking group said it had obtained Bank Negara Malaysia’s approval to start negotiations with TMA for the stake sale. The remaining 5.3% stake in RHB Insurance is held by Kumpulan Syed Kechik Sdn Bhd.
Subsequently, RHB Bank said in August that it was expecting to complete the disposal by the end of 2020’s first quarter, while TMA had started due diligence on RHB Insurance.
Talk that RHB Bank was looking to sell the non-core asset, which had total assets of RM1.78 billion and liabilities of RM1.2 billion as of end-2018, had surfaced as early as 2015. With a market share of 4.4%, it was the 10th largest insurer in the country, according to RHB Bank’s annual report.
In 2016, Reuters reported that Tokio Marine could buy out RHB Insurance for as much as US$500 million. Its Tokio Marine Insurans was the seventh largest non-life insurer in Malaysia as at end-2018, with gross written premiums of RM920 million and a 5.1% market share.