Prudential and Thanachart Bank have partnered in an exclusive 15-year deal to jointly develop their bancassurance business in Thailand.
Prudential Thailand will acquire 100 per cent of Thanachart Life, a wholly-owned life insurance subsidiary of Thanachart Bank.
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The consideration for Thanachart Life is £358m (THB 17.5bn) settled in cash on completion, with a further payment ofTHB 0.5bn payable 12 months after completion.
This is subject to a post-completion adjustment to reflect the net asset value as at the completion date. The transaction is subject to regulatory approval and is expected to close in Q1 2013.
Prudential said the transaction builds on its strategy of focusing on the highly attractive markets of Southeast Asia.
By partnering with Prudential, Thanachart Bank’s staff will also benefit from additional training and sales tools.
Thanachart Bank is the fifth-largest retail bank in Thailand with over four million customers and over 630 branches.
Tidjane Thiam, Prudential’s group chief executive said: "We have had a long standing ambition to significantly increase our presence in Thailand, one of our key target markets in South East Asia.
"This long-term exclusive partnership with Thanachart Bank positions us well for the future and is in line with our multichannel distribution strategy."
It is easy to see the attraction of Thailand as an target market for Prudential based on analysis of data in a report, The Insurance Industry in Thailand, Key Trends and Opportunities to 2016, which is available at the Insurance Intelligence Center (IIC).
This says the Thai life insurance segment valued THB328.9bn (US$10.7bn) in 2011, accounting for a share of 70.1% and registered a CAGR of 12.97% during the period 2007-2011.
This growth was mainly driven by the growing demand for individual life insurance schemes, according to the report.
The IIC report explains that the life insurance segment is expected to increase in value at a CAGR of 11.46% over the forecast period, from THB328.9bn in 2011 to THB565.87bn in 2016.
Meanwhile, Thailand’s personal accident and health insurance segment increased in written premium value from THB9.4bn in 2007 to THB20.98bn in 2011, at a CAGR of 22.3% during the review period, according to the IIC.
Looking ahead, the IIC’s Thailand insurance report says the Thai personal accident and health insurance category is expected to value THB39.8bn in 2016, growing at a CAGR of 13.7%. The rise in healthcare cost and aging population is expected to encourage growth in the future.
Prudential’s deal with Thanachart Bank also follows approval by the Thai insurance regulator, the Office of Insurance Commission (OIC), for an increase in the maximum foreign ownership limit in 2011 for both domestic life and non-life insurance companies from 25% to 49%, says the IIC. The requirement that 75% of the directors be Thai nationals is also being removed.
Furthermore, based on the recommendation from the OIC, the IIC says Thailand’s finance minister may permit greater foreign ownership and allow a majority of foreign directors.
This can happen in cases where the operation of the insurance company may result in losses to customers or to the public in general.
The IIC’s Thailand Insurance Report explains that regulatory changes will encourage further investment in the insurance industry and enable insurers to raise fresh capital. It will help in strengthening the financial position and competitiveness of Thai insurance companies.
