RHB, Tokio Marine call off insurance deal

Both companies were not able to reach an agreement on mutually acceptable terms and conditions for the proposed disposal


SHARES of RHB Bank Bhd fell yesterday after the group cancelled plans to dispose of its general insurance business to Tokio Marine Asia Pte Ltd.

The counter closed 0.9% or five sen lower at RM5.62 yesterday for a market capitalisation of RM22.54 billion, after seeing 5,129,100 shares traded during the day. The FTSE Bursa Malaysia KLCI advanced 0.3%.

During the afternoon trading session, the stock slid as much as 1.4% to an intraday low of RM5.58.

“RHB Bank wishes to announce that after much negotiations and deliberations, both the company and Tokio Marine Asia have not been able to reach an agreement on mutually acceptable terms and conditions for the proposed disposal.

“Accordingly, RHB Bank and Tokio Marine Asia have mutually agreed to cease negotiations, and will not proceed with the proposed disposal,” the group noted in an exchange filing yesterday.

It was reported in August that Tokio Marine Holdings Inc, the Japan-based parent of Tokio Marine Asia, was considering buying RHB Insurance Bhd to boost its presence in the Malaysian market.

According to RHB Bank’s 2018 annual report, its insurance subsidiary is the 10th-largest insurer in the country with a 4.4% market share.

On July 31, the country’s fourth-largest banking group by assets received Bank Negara Malaysia’s (BNM) approval to begin talks with Tokio Marine Asia for a disposal of up to 94.7% of its interest in RHB Insurance.

The approval is valid for six months from the date of BNM’s letter dated July 29. Both parties are required to obtain approval from the minister of finance, with the recommendation of BNM, before entering into any definitive agreement to effect the proposal.

In August, RHB Bank group MD Datuk Khairussaleh Ramli (picture) said the lender hopes to complete the sale of its general insurance business to Tokio Marine Asia by the first quarter of 2020 (1Q20).

“We hope to complete the discussions by end-October and make a submission to BNM within November. If all goes well, we can hopefully complete the deal by the end of 1Q20,” he told a media briefing.

Discussions between the two parties had already begun at the time, Khairussaleh added that Tokio Marine Asia had begun conducting due diligence on RHB Insurance.

The general insurance business typically contributes about 4% to 5% of the group’s overall profit before tax (PBT), according to Khairussaleh.

The unit’s PBT came in at RM70 million for the first half of 2019, while the group’s total PBT amounted to RM1.66 billion.

KAF-Seagroatt & Campbell Securities Sdn Bhd said RHB Insurance had a book value of RM574 million as at end-2018.

Separately, Hong Leong Investment Bank Bhd had said RHB Bank could register a disposal gain of up to RM800 million from the proposed sale, assuming a price-to-book ratio of 2.35 times — the historical average ratio for mergers and acquisitions involving Malaysian insurers.

It also said the proposed divestment was not a surprise, given that insurance is a non-core asset for the bank and talks of a sale have surfaced since 2015.