New Malaysian accounting rule reason for banks selling insurance units

Banks are growing capital ahead of the new accounting standard on loan impairment called MFRS 9 which stipulates higher provisions in anticipation of future potential losses. Analysts have speculated that this could be the reason banks are selling their non-core assets, including their insurance divisions. Recent examples include RHB Bank starting negotiations to sell its insurance business and Hong Leong Financial Group getting the green light from Bank Negara to sell its shares in Hong Leong Assurance (HLA) and Hong Leong MSIG Takaful (HLMT). All banks are required to adopt the new standard from 1 January. Other than growing their capital, the move by banks to divest their insurance units could further bolster their fee-based income through bancassurance tie-ups with the relevant buyers. It has been reported that Japanese insurance giant Tokio Marine Holdings had entered into talks to acquire RHB Insurance, the general insurance business of RHB Bank, at up to 3.5 times book value or some US$500 million. Earlier this year, Hong Leong Financial Group and its unit HLA Holdings (HLAH) got approval from Bank Negara to start negotiations with specified parties to offload HLAH’s equity interest in HLA and HLMT.Write something here...