BANGKOK -- Siam Commercial Bank, Thailand's largest lender by assets, has agreed to sell its life insurance business to a Hong Kong-based FWD Group Financial Services after nearly four months of negotiations.
SCB's chief executive Arthid Nanthawithaya said during the signing ceremony in Bangkok on Monday that the deal is worth 92.7 billion baht ($3 billion), which makes it the biggest ever acquisition in Southeast Asia's insurance sector.
Analysts say the deal will help Hong Kong tycoon Richard Li's FWD rapidly expand its customer base in Thailand through SCB's network. Hong Kong-based AIA Group, Canada's Manulife Financial and U.K.-based Prudential Plc were reportedly among insurers that expressed interest in the acquisition.
Competition in insurance has intensified in Southeast Asia, with foreign groups trying to grab market share in a region where insurance penetration rates remain low, leaving plenty of room for growth.
SCB Life Assurance ranks in market share behind Muang Thai Life Assurance, Hong Kong-based Thai Life Insurance and Krungthai-AXA Life.
FWD is controlled by the youngest son of property billionaire Li Ka-shing. It entered the insurance business in 2013 by acquiring ING Group's insurance business in Hong Kong, Macao and Thailand.
FWD has since expanded to Asian markets including Indonesia, the Philippines, Singapore, Vietnam and Japan.
Under the deal, SCB will distribute FWD's life insurance products to the bank's customers in Thailand, leveraging the bank's experience in the distribution of insurance policies for 15 years. Huynh Thanh Phong, FWD Group chief executive, said he is confident about the group's product capabilities and it is well aware of the needs and preferences of Thai banking customers.
"It is clear that the insurance business of FWD will expand through the wider customer base of SCB," said an analyst.
"An aging population and spiraling medical costs are expected to boost demand for medical insurance and retirement funds in Thailand, where the social security system is still underdeveloped," said Makoto Saito, an economist at Japan's NLA Research Institute. "Thailand's life insurance market is likely to continue to expand," he added.
The transaction is expected to be completed by the second half of 2019. SCB Life's customers will not be affected by the transfer of ownership to FWD as all existing SCB Life policies will be maintained by FWD, according to the agreement.