Thailand's SCB Said to Mull Options for $3 Billion Insurance Arm

Siam Commercial Bank Pcl, Thailand’s third-largest lender, is exploring options for its life insurance operations that could involve bringing in a foreign partner, people familiar with the matter said.

The Bangkok-based lender has received proposals from investment banks and is considering possibilities including selling a stake in unit SCB Life Assurance Pcl and granting rights to sell insurance products through Siam Commercial’s branch network, according to the people. A deal could give Siam Commercial’s life insurance businesses a valuation of at least $3 billion, the people said, asking not to be identified because the discussions are confidential.

Foreign insurers have been drawn to Southeast Asia as increasing household wealth leads to rising demand for life coverage. Allianz SE agreed last year to buy control of Philippine National Bank’s life insurance arm, while Meiji Yasuda Life Insurance Co. bought 15 percent of Thai Life Insurance Pcl for $714 million in 2013, data compiled by Bloomberg show.

Last year, Siam Commercial finished buying the remaining shares it didn’t already own in SCB Life in a deal valuing the insurer at about 77.8 billion baht ($2.2 billion). It previously increased its stake in SCB Life by buying back the shares in the insurer held by New York Life Insurance Co.

Bancassurance Deals

Thailand’s insurance penetration remains significantly lower than other parts of Asia, Fitch Ratings said in a November report. SCB Life Assurance was Thailand’s fifth-biggest life insurer with 184 billion baht of total assets at the end of 2014, trailing top-ranked AIA Group Ltd., according to the country’s insurance regulator. 

Siam Commercial had more than 1,200 branches at the end of last year, its annual report shows. The bank hasn’t made a final decision on how to proceed, and it’s possible no transaction will result, one of the people said. An official at Siam Commercial didn’t immediately respond to an e-mail seeking comment.

The lender and SCB Life set up a joint task force in January to examine the group’s insurance businesses and “invigorate” its bancassurance channels to respond to fiercer competition, according to its annual report. The bank told SCB Life in July 2014 it had spoken with other major insurers about distributing insurance products through its network, as the bank itself had limited products to meet customer needs, an exchange filing shows.

The biggest Southeast Asian insurance deals in the past few years have been so-called bancassurance agreements. DBS Group Holdings Ltd. agreed in April 2015 to sell the rights to distribute insurance through its branches to Manulife Financial Corp. for S$1.6 billion ($1.18 billion) for 15 years. 

Sompo Japan Nipponkoa Holdings Inc. is nearing an agreement with CIMB Group Holdings Bhd. to distribute general insurance products through the Malaysian lender’s branches across Asia, people with knowledge of the matter said last week. Japan’s third-largest general insurer could pay about $200 million to CIMB under the proposed deal, the people said at the time.

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