HONG KONG/BANGKOK Siam Commercial Bank (SCB.BK), Thailand's third-largest lender, is in talks to sell a 25 percent stake in its life insurance business SCB Life Assurance PCL SCBLIF.BK, people familiar with the matter told Reuters.
Siam Commercial Bank is mostly in discussions with Japanese insurers, although no deal is imminent, they added, declining to be identified as the plans were confidential. The stake sale could fetch about $600 million based on SCB Life's current market value of $2.4 billion.
SCB Life is ranked No.5 in the Thai life insurance market with a share of 10 percent. 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.
It is not immediately clear whether Siam Commercial plans to issue new shares or sell its own stake in the life insurance business. The bank owns 94.7 percent stake in SCB Life.
Siam Commercial declined to comment.
Rising personal income in Asia is giving, for the first time in many cases, individuals and families the ability to afford insurance. That new demand has boosted stock prices and corporate valuations, culminating in a spate of M&A transactions in the industry in the past four years.
Foreign companies are attracted to Thailand's under-penetrated insurance market and aging population, Fitch Ratings said in a recent report last month.
To tap into that growth, Japanese insurers, British insurer Prudential (PRU.L), Canada's Sun Life Financial Inc (SLF.TO) among others have turned aggressive buyers of Southeast Asian financial services firms as they battle 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, Reuters previously reported.
Siam Commercial's planned sale comes three years after it bought out New York Life from a life insurance joint venture for 8.4 billion baht ($262 million).
SCB Life competes with top three rivals AIA Group Ltd (1299.HK), Muang Thai Life Assurance (MTI.BK) 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.
Despite domestic political unrest, the Thai life insurance market posted strong growth with first-half premiums rising 19 percent from a year earlier to 256 billion baht, according to data from Thai Life Assurance Association.
Competition is expected to intensify in the second half when insurers plans launch new product launches to attract clients.
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.
(1 US dollar = 32.0200 Thai baht)
(Reporting by Denny Thomas in HONG KONG, Manunphattr Dhanananphorn and Khettiya Jittapong in BANGKOK; Editing by Ryan Woo)