Banks’ big insurance grab

TWO deals worth a combined RM6.5bil in the space of just two days have sent a clear signal: Malaysian banks are tightening their grip on the country’s multibillion ringgit insurance and takaful industry.

The transactions come more than a year after Public Bank Bhd emerged as the single-largest shareholder of LPI Capital Bhd, reinforcing the view that bancassurance is no longer merely a supplementary business attached to traditional banking.

As competition for deposits intensifies and lending margins face pressure across interest rate cycles, banks are seeking more resilient sources of non-interest income.

Insurance and takaful offer recurring fee income, access to long-term customer savings and significant opportunities to cross-sell products through vast branch and digital networks.

On Aug 3, the country’s largest lender, Malayan Banking Bhd (Maybank), announced that it would acquire the remaining 30.95% stake in the holding company for Etiqa’s operations in Malaysia and Singapore.

The RM4.83bil transaction will give Maybank full control of Maybank Ageas Holdings Bhd (MAHB), bringing one of the region’s largest insurance and takaful platforms entirely under its ownership.

Just a day later, MNRB Holdings Bhd announced that it would sell Takaful Ikhlas Family Bhd and Takaful Ikhlas General Bhd to Bank Rakyat for RM1.64bil in cash.

Takaful Ikhlas’ family and general businesses generated a combined profit after tax of RM108.8mil in the year ended March 2026, while its general takaful arm crossed RM1bil in gross written contributions.

This means Bank Rakyat is buying an established earnings platform, customer base and distribution network rather than attempting to build them from scratch.

The renewed push into insurance, however, did not begin with these two deals.

In December 2024, Public Bank acquired a 44.14% stake in general insurer LPI for RM1.72bil in cash from the family of the late Tan Sri Teh Hong Piow, making it LPI’s single largest shareholder.

Teh, who died in 2022, founded both Public Bank and LPI, meaning the transaction effectively brought the two financial institutions he built under closer strategic alignment.

Together, the three transactions suggest that Malaysian banks are no longer satisfied with merely distributing insurance products.

They increasingly want a larger share of the underwriting profits and greater control over the entire customer relationship.

Malaysian banks already own the most valuable part of the bancassurance equation, which is customer access.

They know when a customer takes a mortgage, buys a car, starts a business, accumulates savings or approaches retirement. Each event creates a natural opportunity to sell protection, savings and investment products.

Under a partnership model, the bank earns distribution fees while the insurer retains the underwriting profit and much of the longer-term economic value.

Ownership of the insurance business, on the other hand, allows the bank to retain a larger share of the earnings, coordinate product development more closely and use its branch and digital channels more aggressively.

In the case of Maybank, full ownership of Etiqa would place the bank in a stronger position for a possible initial public offering (IPO), as speculated a few years ago.

Etiqa is currently the fourth-largest takaful provider in the world – it is number one in general insurance and general takaful in Malaysia.

Maybank has some 14 million customers in Malaysia and Singapore, while Etiqa has about four million.

About 24% of Maybank’s customers are insured with Etiqa, while half are through bancassurance with Maybank.

With full ownership of Etiqa, Maybank wants bancassurance to contribute 50% of Etiqa’s total premiums by 2030, up from about 40% currently.

Maybank also seeks to extract better dividends from Etiqa.

Maybank president and group chief executive Datuk Seri Khairussaleh Ramli said: “For Etiqa’s side, historically, MAHB has been paying a fairly low dividend payout from their profit.

“And now, by owning 100%, we see an opportunity for alignment of dividend payouts within the insurance group to support Maybank’s capital management and dividend policy.”

Market pundits are divided about the plan to take full control of Etiqa.

AmInvestment Bank Research voiced its concerns on the RM4.83bil deal’s frothy valuation and near-term capital drag.

Kenanga Research, which is “neutral” on the deal, said the acquisition “takes the gloss off slightly” from Maybank’s dividend appeal.

Meanwhile, Hong Leong Investment Bank Research calls the deal a “tactically positive” move. It noted that the acquisition provides Maybank with greater control over a strategically important insurance franchise while improving capital fungibility across the group.

Fund manager Danny Wong calls the Maybank-Etiqa deal a “strategic integration”, rather than a plan for an IPO for now.

“But I can’t say it wouldn’t happen in future, it might be a capital management decision,” says Wong, who is the chief executive officer of Areca Capital.

When asked about Malaysian banks consolidating control in the insurance and takaful space, Wong says this is part of a more current model to increase customer lifetime value (CLV).

CLV represents the total net profit a bank expects to earn from a customer over the entire duration of their relationship.

“To increase CLV, one financial group provides deposits, loans, investments, insurance, payments and wealth management through a single ecosystem.

“The old model was that banks lend money; insurers sell protection; asset managers invest savings,” says Wong.

“At a macro level, though not across the board but increasingly, we see a broader trend of banks having more integration for fee-based income or cross-selling, risk diversification and deepening client relationships.

“Also, it offers total wealth management as well as better cost and capital management.”

Meanwhile, iFAST Capital research analyst Kevin Khaw Khai Sheng tells StarBiz 7 that bank-backed insurers now play a meaningful, although varied, role in supporting bank earnings.

Based on the latest disclosures, insurance businesses contribute approximately 2% to 11% of group profits among selected Malaysian financial groups, although the figures are not directly comparable due to differences in ownership and accounting treatment.

Full ownership allows a bank to retain a larger share of insurance profits, deepen customer relationships and improve cross-selling across its banking network, according to Khaw.

“However, it also requires more capital and exposes the group to claims risk, investment volatility and greater operational complexity.

“Whether full ownership is advisable ultimately depends on the bank’s scale, insurance expertise and financial capacity.

“It is generally more attractive when the insurer can generate returns above the bank’s cost of equity after accounting for the acquisition price, funding costs and capital requirements.

“Smaller banks (or large banks that are not prioritising the insurance business), meanwhile, may achieve better risk-adjusted returns through joint ventures or distribution partnerships.”

Khaw views Maybank’s proposed acquisition of the remaining stake in Etiqa as a company-specific transaction, rather than evidence of an industry-wide shift towards full ownership.

As Maybank already controls and consolidates Etiqa, he adds the acquisition will mainly increase the share of earnings attributable to Maybank shareholders rather than add new consolidated insurance revenue.

“Its value creation will therefore depend on whether Maybank can improve cross-selling, realise the projected return on equity accretion and manage the capital impact without materially weakening its capital position,” says Khaw.

Despite the transactions involving Maybank, Bank Rakyat and Public Bank, it is worth noting that RHB Bank Bhd and CIMB Group Holdings Bhd have a different approach in the insurance space.

RHB Bank is in the middle of selling up to 100% of its stake in RHB Insurance Bhd to Tokio Marine Asia Pte Ltd. Under the proposed merger with Tokio Marine Insurans (M) Bhd, RHB Bank will retain a minority stake of up to 35% in the newly enlarged insurance entity.

Meanwhile, CIMB divested its stake in the life and takaful businesses via CIMB Aviva back in 2013 to Khazanah Nasional Bhd and Canadian insurer Sun Life Financial Inc. Khazanah Nasional is a substantial shareholder of CIMB.

While strategies to ownership may differ, it is notable that Malaysia’s major banks are placing insurance and takaful at the heart of their long-term playbooks – and not as a side business.