``This is in compliance with Malaysia's policies on foreign-owned branches,'' managing director of Asia Insurance Group's life assurance arm, Ng Seng Leong, told Reuters.

All branches of foreign insurers have to be locally incorporated in compliance with Malaysia's Insurance Act 1996.

Ng said the two firms would be capitalised at 35 million ringgit each, the minimum requirement.

The business of the branches had been transferred into the two new units with effect from January 1, but Ng said there would be no difference in business approaches.

``As far as capacity and underwriting are concerned, there is no change,'' he said.

The next step for the group would be to divest its 100 per cent holding in the units down to the 51 per cent limit set by the Malaysian regulatoryauthorities.

Malaysia's National Economic Action Council has given foreign insurers until June 2003 to reduce their stakes.

Ng said the group had been searching for suitable partners for some time, but was not close to making an announcement.

``It must be a partner that can contribute to the growth of the company,'' he said.

He said Asia Insurance's prospects in Malaysia were good and that the company was looking to expand.