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UPDATE 2-Siam Commercial Bank held talks to sell 25 pct stake in insurance unit-sources
September 2, 2014 / 6:31 AM / 3 years ago

UPDATE 2-Siam Commercial Bank held talks to sell 25 pct stake in insurance unit-sources

* Foreign firms attracted to underdeveloped Thai insurance market

* SCB Life 2014 H1 profit rose 30 pct

* Thai life insurance H1 premium rose 19 pct to 256 bln baht (Adds company CFO comments)

By Denny Thomas and Manunphattr Dhanananphorn

HONG KONG/BANGKOK Sept 2 (Reuters)- Siam Commercial Bank , Thailand’s third-largest lender, has held talks to sell a 25 percent stake in its life insurance business SCB Life Assurance PCL, people familiar with the matter told Reuters.

In an email, Siam Commercial Bank Chief Financial Officer Deepak Sarup said the lender has no current plans to sell any of its stake in SCB Life nor is it in discussion with any insurer to do so. The bank owns 94.7 percent of SCB Life.

The sources, however, said Siam Commercial Bank had held talks mostly with Japanese insurers about selling its stake, although no deal is imminent.

The sources declined to be indentified as the plan was confidential. The stake sale could fetch about $600 million based on SCB Life’s current market value of $2.4 billion.

SCB Life is Thailand’s fifth largest life insurer, with a 10 percent market share. Siam Commercial has said it wanted to de-list SCB Life from the stock exchange because the free float of stock is less than 5 percent.

Rising personal incomes in Asia mean more individuals and families are able to afford insurance, which in turn has boosted stock prices and corporate valuations.

Southeast Asia in particular is seen as a growth region for insurers, which has triggered a spate of M&A transactions in the past four years.

Thailand’s under-penetrated insurance market and ageing population make it attractive, Fitch Ratings said in a recent report last month. In the first half of this year, insurance premiums in Thailand rose 19 percent from a year earlier to 256 billion baht, data from the industry association shows.

BOOMING MARKET

SCB Life competes with top-ranked rivals AIA Group Ltd , Muang Thai Life Assurance and unlisted Thai Life Insurance. It reported a net profit of 3.1 billion baht in the first half, up 30 percent from a year earlier.

Three years ago, Siam Commercial Bank bought out New York Life’s take in SCB Life for 8.4 billion baht ($262 million).

SCB Life has an embedded value of 30.419 billion baht at the end of 2013, and some analysts expect the business to be valued at between 2-2.5 times embedded value.

Embedded value is a popular gauge used in insurance M&A. It measures the value of an insurance company based on future earnings from current policies.

In the past few years, Japanese insurers, Prudential , Sun Life Financial Inc and other companies have become aggressive buyers of Southeast Asian financial services firms to offset sluggish growth at home.

Last year, Japan’s Meiji Yasuda Insurance Co bought a 15 percent stake in unlisted Thai Life Insurance Co for about $700 million, beating Sumitomo Life Insurance Co and a raft of other private equity bidders.

$1 = 32.0200 Thai baht Reporting by Denny Thomas in HONG KONG, Manunphattr Dhanananphorn and Khettiya Jittapong in BANGKOK; Editing by Ryan Woo and Miral Fahmy

Our Standards:The Thomson Reuters Trust Principles.
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