Prudential buys Thanachart insurance arm

Takeover of the Thailand business to further consolidate ownership throughout the region

PUBLISHED : Tuesday, 06 November, 2012, 12:00am
UPDATED : Tuesday, 06 November, 2012, 4:24am

Prudential, Britain's biggest insurer by market value, plans to buy the life insurance business of Thanachart Bank in Thailand for £368 million (HK$4.5 billion).

The deal is part of Asia's insurance industry consolidation, highlighted by Richard Li Tzar-kai's purchase of ING's insurance business in Hong Kong, Macau and Thailand last month.

"It has been a very active year for the industry," said Barry Stowe, the chief executive of Prudential Asia. "You can understand why people would be interested in buying with the market outlook being so positive."

Prudential will pay Bangkok-based Thanachart, which is partly owned by Canada's Bank of Nova Scotia, £358 million in cash and an additional £10 million 12 months later.

"Usually assets that would come to the market, won't be as good," said Stowe, who added that he expected more mergers and acquisitions in the industry especially as banks might need to shed their capital-intensive insurance businesses to meet regulatory requirements.

The transaction is subject to regulatory approval and expected to be finalised early next year. The 200 employees from Thanachart will be evaluated before they join the new owner.

Prudential employs about 300 people in Thailand. Stowe said the company was not planning to cut staff from the combined entity and would continue to hire in Thailand.

"I'd be very disappointed if in the near term we didn't add more staff," said Stowe, who added that the environment was not one where companies could "save to achieve greatness".

Prudential said life insurance penetration in Thailand remained low at only 2.7 per cent, providing substantial long-term profitable growth opportunities.

Prudential Life Assurance (Thailand) will also establish an exclusive 15-year partnership with Thanachart Bank to develop the groups' business, which focuses on distributing insurance products via banks.

Prudential leads in many Asian markets, including Singapore, Malaysia, Indonesia and the Philippines. It is ranked 11th in Thailand before the acquisition and has been looking to boost its market share.

The acquisition of Thanachart Life would double Prudential's Thai market share, the British giant said.