KUALA LUMPUR (Sept 12): Analysts are keeping a close eye on RHB Bank Bhd’s (KL:RHBBANK) ongoing bancassurance dispute with Tokio Marine Life Insurance Malaysia Bhd, voicing hope that the matter does not end up being a drawn-out affair.

The dispute centres around Tokio Marine’s “right of first refusal” under their ten-year bancassurance arrangement agreement (BAA), inked in 2014, which is set to expire on Dec 31, 2024.

“The question isn’t really how fast can they get a partner but how long will this dispute go on,” said a banking analyst. He noted that RHB would not face difficulty in getting another bancassurance partner, as any insurer would benefit from its wide distribution network.

RHB, in a bourse filing on Sept 10, announced that Tokio Marine had filed a lawsuit against it, seeking a declaration that its right of first refusal under the current BAA remains in force. Tokio Marine also wants RHB to deliver to it the final bid that the bank has decided to accept from among other bidders for a new bancassurance deal.

In addition, Tokio Marine is seeking to restrain RHB from contracting with any third party for the bancassurance business.

RHB contends that Tokio Marine’s right of first refusal had already been exercised and fulfilled. “[RHB] had made an offer to the plaintiff (Tokio Marine) which the plaintiff did not accept. In addition, [RHB] had also given the plaintiff the opportunity to submit their bid as well as a further revised bid for the plaintiff to try to match the terms offered by other bidders,” the bank said.

It is understood that prior to the legal confrontation, RHB made a move to find a new bancassurance partner, anticipating the year-end conclusion of its existing arrangement with Tokio Marine. 

In another stock exchange filing on Sept 11, RHB said that in order to expedite things, it agreed not to enter into any bancassurance agreement with any party while the legal dispute is ongoing. This is to preserve the status quo, pending the Kuala Lumpur High Court’s decision on the lawsuit. 

RHB did not disclose the contribution from the partnership with Tokio Marine or from bancassurance. Any contribution from bancassurance is typically booked as fee or commission income in a bank’s profit-and-loss statement, and helps to supplement a bank’s core earnings.

Last year, RHB recorded RM866.41 million in net income from fees and commission, out of which 22% were commissions — revenue typically based on the transaction size and outcome.

 The bancassurance deal was likely more meaningful for Tokio Marine than it was for RHB, according to analysts who cover the lender.

“I’m going [to need] to get more information from RHB but I can only speculate for now that it’s not material enough to put a dent in their income statement,” an analyst told The Edge.

In July 2019, RHB initiated negotiations with Tokio Marine's holding company, Tokio Marine Asia Pte Ltd (TMA), for the sale of up to 94.7% of its stake in RHB Insurance. However, RHB Bank and TMA mutually agreed to cease negotiations four months later, after the parties were unable to reach an agreement on mutually acceptable terms and conditions for the proposed disposal.

The proposed sale to TMA, had it gone through, would have seen the merger of RHB Insurance and Tokio Marine to become the second largest general insurer group in the country, with combined gross written premiums of approximately RM1.71 billion at the time.

RHB’s share price ended 0.16% higher on Thursday at RM6.24, valuing the group at RM27.2 billion. Year to date, the counter has appreciated by 14.5%.