British insurer Prudential plc (LON:PRU) on Monday said it would buy life insurer Thanachart Life Assurance Company Ltd, a fully-owned unit of Thai lender Thanachart Bank PCL, under an exclusive 15-year partnership with the bank to jointly expand their bank insurance operations in Thailand.
Prudential has agreed to pay GBP358m (USD576.15m/EUR447m) for Thanachart Life in cash at completion of the deal and an additional GBP10m 12 months after that, subject to post-closing adjustments, the buyer said.
The deal is in line with Prudential’s strategy to concentrate on high-growth markets in South East Asia, with Thailand targeted for substantial expansion. According to the group’s CEO Tidjane Thiam, Thailand is one of Prudential’s key target markets in South East Asia and the partnership with Thanachart Bank fits well into its multi-channel distribution strategy, while giving it a good position for the future.
Under the partnership, Prudential and Thanachart Bank will collaborate to offer a large range of life insurance protection and savings products across all branches, they said.
While as size the Thai life insurance market can compare to Indonesia and Malaysia, penetration is as low as 2.7%, allowing for significant long-term profitable growth opportunities, the buyer said. Between 2007 and 2011, market gross premium income in Thailand grew at an annual rate of 16%, with bank insurance accounting for 50% of life insurance first year premiums last year, up from 28% in 2007.
The addition of Thanachart Life, one Thailand’s top 10 life insurers with some one million policies in force, will immediately double Prudential Thailand’s market share, the buyer explained.
For its part, Thanachart Bank views the transaction with Prudential to help its strategy of offering top sector products and services, it said, adding that its employees will get additional training and sales tools, while its customers will gain access to a comprehensive portfolio of insurance and savings products.
Thanachart Bank claims the fifth place among the country’s retail banks with more than four million customers and over 630 branches.
Subject to regulatory clearance, the transaction is due to close in the first quarter of 2013.