SINGAPORE - Siam Commercial Bank Plc (SCB) has begun to formally seek bids for its life insurance business in a sale that could raise about 106 billion baht ($3 billion) for the country's third-biggest lender, said people with knowledge of the process.
Prudential Plc, AIA Group and Manulife Financial Corp are among insurers weighing a bid for SCB Life Assurance, the people said.
SCB was looking to sell a 49% stake in the unit last year, but the process was delayed due to expected changes in foreign shareholder rules governing the sector, according to separate sources aware of the process.
Whether it sells all or only part of the business depends on the offers it receives and who they are from, the people said. First-round bids are expected to be submitted by early February, they added.
The sources for this story declined to be identified as they were not authorised to speak to the media.
SCB CEO Arthid Nanthawithaya declined to comment. Prudential, AIA and Manulife also declined comment.
Thailand caps foreign companies' stakes in domestic insurance ventures at 49%, but the government relaxed the rule last March. However, an approval from the finance minister must be sought first.
Bangkok-based law firm Tilleke & Gibbins said in a note last week that the move is a significant reform for Thailand's life insurance industry, following liberalisation of the country's non-life insurance sector in recent years.
SCB's deal is expected to include rights for a buyer to sell insurance products through the bank's 1,200 branch network. The so-called bancassurance model is lucrative for banks as global insurers are willing to pay hefty fees for access to lenders' branch networks and for exposure to a rapidly growing middle class in developing markets, such as Thailand.
SCB Life is ranked fourth in Thailand's life insurance market, with Muang Thai Life Assurance Plc the market leader.
Other major players are AIA, France's AXA, which has a deal with Krung Thai Bank, and Thai Life Insurance.
Southeast Asia is seen as a growth region for foreign insurers, who are attracted by relatively faster growth rates of life premiums and the region's low insurance penetration.
The Thai Life Assurance Association said this month that total premium income in the country grew 5.4% from January to November 2016, to 508 billion baht. Analysts expect strong growth.
"The Thai economy is expected to grow and there are more savings coming out as well, so things are looking better than before," said Rajnish Juta, who looks after Southeast Asia insurance services at Deloitte & Touche.
"I would look at Thailand and Indonesia as the ones where companies will be looking for growth. But the reason why they might choose Thailand is because it's much more stable than Indonesia. It's easier to do business in Thailand," he said.
SCB Life was set up in 1976 with registered capital of 100 million baht under the name Mahanakorn Life Insurance Co Ltd. Two years later, SCB, the Crown Property Bureau and affiliated companies held a majority stake in the company and changed the name to SCB Life Assurance to support the business growth.
In 2000, SCB and New York Life International Inc signed the joint venture agreement to expand SCB Life and changed the company’s name to Siam Commercial New York Life Insurance Plc.
In 2015, SCB acquired all the shares of the company held by New York Life International and PMCC (Thailand) Co Ltd, making it the largest shareholder with 94.7%. The company changed the name to SCB Life Assurance.
SCB Life shares were delisted from the Stock Exchange of Thailand in late May 2015 after SCB acquired the remaining 5% of the shares it had not already owned from all minor shareholders at 1,117.25 baht each a year earlier.
SCB shares closed unchanged on the SET on Monday at 150.50 baht in trade worth 1.3 billion baht. The report came after the market closed.