FWD, owned by tycoon Richard Li, is starting with a minority stake in HSBC’s Malaysian operation, but has bigger plans
Hong Kong/Kuala Lumpur — Hong Kong-based insurer FWD Group has agreed to buy HSBC Holdings’ 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) 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 foreign ownership rules.
The exact value of the deal is not immediately clear, with one of the people putting it at less than $100m. It is expected to be completed by the end of 2018, 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. HSBC has been looking to exit the Malaysian insurance joint venture in the past year to focus on its core banking offerings, two of the people said.
In 2017, the Malaysian unit of German insurer Allianz 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 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 spokesperson 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 is not public.
Foreign insurers were caught off guard in 2017 when BNM said it would enforce its 2009 rule setting a 70% cap on foreign ownership of local insurance businesses.
The directive 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 ban on investing in alcohol and gambling.
Growth in the takaful business in Malaysia, the world’s second-largest Islamic insurance market, is outpacing that of the conventional sector, a Fitch Ratings report said in January.