Prudential acquires Thanachart Life
Thanachart Bank Public Company Limited and Prudential Life Assurance Thailand Public Company Limited, a subsidiary of Prudential plc have reached an agreement to establish an exclusive 15 year partnership to develop jointly their bancassurance business in Thailand.
In conjunction with this agreement, Prudential Thailand will acquire 100 per cent of Thanachart Life Assurance Company Limited, a wholly-owned life insurance subsidiary of Thanachart Bank. The consideration for Thanachart Life is GBP358 million (THB 17.5 billion) settled in cash on completion, subject to a post-completion adjustment based on agreed terms to reflect the net asset value as at the completion date, with a further payment of GBP10 million (THB 0.5 billion) payable 12 months after completion. The transaction is subject to regulatory approval and is expected to close in the first quarter of 2013.
For Prudential, this transaction builds on its strategy of focusing on the highly attractive markets of South East Asia. Thailand's life insurance market is significant in size, comparable in premium terms to each of Indonesia and Malaysia1. Life insurance penetration in Thailand remains low at only 2.7 per cent1 providing substantial long-term profitable growth opportunities.
Market gross premium income increased at a 16 per cent compound annual growth rate between 2007 and 2011. Bancassurance has been the main driver of growth over this period, accounting for 50 per cent of life insurance first year premiums in 2011, compared to 28 per cent in 2007. For Thanachart Bank, this partnership supports its strategy of providing market leading products and services throughout Thailand. By partnering with Prudential, Thanachart Bank's staff will benefit from additional training and sales tools while its customers will have access to a comprehensive range of protection and savings products. Thanachart Bank is the fifth-largest retail bank in Thailand by number of branches with over four million customers and over 630 branches. The acquisition of Siam City Bank in 2010 enabled Thanachart to increase its distribution network from 256 branches to its current size.
Thanachart Life has only recently started to distribute life insurance products through these additional Siam City Bank branches. As part of the bancassurance partnership, Prudential and Thanachart Bank will collaborate in providing excellent customer service and a wide variety of market leading life insurance, protection and savings products across all the branches. Prior to its acquisition by Thanachart Bank, Siam City Bank had its own life insurance company, which was not merged with Thanachart Life and is not part of the acquisition being announced today.
Thanachart Life is a top-10 life insurer in Thailand with around one million in-force policies. In the 12 months to 30 June 2012, Thanachart Life's profit after tax was GBP25 mil- lion (THB 1,226 million). The acquisition of Thanachart Life will immediately double Prudential Thailand's market share2. Upon completion of the transaction, Thanachart Life will become a wholly-owned subsidiary of Prudential Thailand.
Mr Somjate Moosirilert, CEO and President of Thanachart Bank, said, "Following the approval of the Office of Insurance Commission, Thanachart Bank looks forward to partnering with Prudential to offer market-leading life insurance products to our customers throughout Thailand. With this agreement and the commitment of Prudential to develop innovative new products and provide training to our staff, we expect to offer even better products and services to our customers. In this regard, this agreement strengthens our commitment to be a universal banking group which provides full financial services to all our customers, including deposits, auto hire purchase, housing and personal loans, SME and corporate banking services, insurance, life assurance, securities brokerage and fund management."
Tidjane Thiam, Group Chief Executive, Prudential plc, 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 longterm exclusive partnership with Thanachart Bank positions us well for the future and is in line with our multichannel distribution strategy. We continue to invest and grow our partnership business, alongside our well established and successful agency workforce.
"We are especially proud to be the partner of Thanachart Bank, one of the largest and most successful banks in Thailand, with a major shareholder such as the Bank of Nova Scotia, a leading international financial institution. Our combined strong product offering, distribution platform and operational excellence will continue to bring attractive benefits to customers, sales staff and shareholders of both organisations".