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AWSJ : AIG Squares Off With Malaysia
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Yap Yok Foo
2003-08-15 00:52:33 UTC
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From The Asian Wall Street Journal
15 August 2003

AIG Squares Off With Malaysia

Insurer Asks Government to Grant
New Exemption From Incorporation
By LESLIE LOPEZ
Staff Reporter of THE WALL STREET JOURNAL


KUALA LUMPUR, Malaysia -- Global insurance giant American
International Group is resisting demands by Prime Minister Mahathir
Mohamad's government that it locally incorporate its two Malaysian
operations, which control 15% of the country's life- and
general-insurance market.

American International Group, the only insurer that hasn't complied
with a 1989 Malaysian law requiring foreign-owned banks and insurance
concerns to incorporate locally, recently applied for dispensation to
avoid restructuring the Malaysian branches of American International
Assurance Co. and American Home Assurance Co., according to industry
executives. AIG's previous reprieve, a five-year exemption from
meeting the local incorporation rule, expired in June.

A senior government official said AIG has submitted an appeal for a
continued exemption to Dr. Mahathir, who also is Malaysia's finance
minister. The premier has yet to decide on the matter, the official
said.

An AIG representative in Malaysia declined to comment. Joseph Norton,
AIG's director of public relations in New York, said "AIG does not
comment on its confidential discussions with the government."

Several former Malaysian employees of the group say AIG's chairman and
chief executive, Maurice Greenberg, has long opposed local
incorporation and has lobbied the Malaysian government to avoid it.
"He's a fighter and doesn't believe in giving up control," said a
financial consultant who worked in AIG's Malaysian operations during
the 1990s.

Former employees and industry executives say AIG's reluctance to
incorporate locally also is driven by financial considerations.
Running its Malaysian operations as branches, instead of as
Malaysia-registered concerns, gives AIG more flexibility in financial
accounting, benefiting the parent company, according to several former
Malaysia-based AIG employees. Mr. Norton declined to comment on the
group's internal business practices.

Malaysia's local incorporation rule stems from the late 1980s, when
the government enacted laws that gave Malaysia's finance minister and
its central bank sweeping powers to shore up the financial system. The
laws also empowered the finance minister to order foreign banks and
insurance companies to incorporate their businesses as
Malaysia-registered companies.

The government's stated aim was to substantially increase the overall
capitalization of the finance industry, in part, by forcing foreign
companies to commit more funds to the country in the form of
shareholders' equity in Malaysian subsidiaries. Except for AIG,
foreign banks and insurance companies have all since complied with the
rule.

AIG's two Malaysian branches control sizable chucks of the local
market. According to central-bank figures, AIA and American Home
Assurance had combined assets of more than 8.5 billion ringgit ($2.24
billion), accounting for 15% of the total assets of 58.35 billion
ringgit in the general and life sectors of the Malaysian insurance
industry at the end of 2001.

Write to Leslie Lopez at ***@wsj.com

http://online.wsj.com/




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blorg2k3
2003-08-15 04:52:28 UTC
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Post by Yap Yok Foo
AIG's two Malaysian branches control sizable chucks of the local
market.
Is "sizable chuck" some insurance term I'm not familiar with ?
j***@gmail.com
2013-09-24 10:43:41 UTC
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