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Thai Life Explores $500 Million Stake Sale Amid M&A Boom

Lak Meuang (City Pillar) in downtown Bangkok, Thailand.
Lak Meuang (City Pillar) in downtown Bangkok, Thailand.

Thai Life Insurance may sell a stake of at least 20 percent, sources familiar with the matter said, in a deal that could value the country's No. 2 life insurer at about $2.5 billion and mark the third auction in the domestic sector within a year amid a huge wave of Thai M&A.

Highlighting fast-growing interest in one of Asia's most underdeveloped insurance markets, the potential sale comes on the heels of Prudential $590 million acquisition of Thanachart Life Assurance in November and Hong Kong tycoon Richard Li's purchase of ING's Hong Kong and Thailand units for $2.1 billion in October.

Announced Thai M&A deals have soared to a record $18.7 billion so far this year on mostly outbound acquisitions, overtaking the total value of deals in 2010 and 2011 combined, according to Thomson Reuters data. In contrast, Asia-Pacific ex-Japan deals are down 12 percent from last year to $298 billion.

Most of the deals are driven by cashed-up companies eager to expand overseas and include an audacious $7.2 billion bid by Thai tycoon Charoen Sirivadhanabhakdi for the shares he does not own in Singaporean conglomerate Fraser and Neave. For the inbound offers, suitors see steady growth and rising demand for products such as consumer goods and financial services, not to mention valuations that are only getting richer.

The Thai Life stake sale is expected to draw interest from Japanese suitors and other financial institutions, said the sources, who have direct knowledge of the matter and declined to be identified as the matter is not public. Like any auction, there is no guarantee the process will end in a sale.

The company, controlled by the Chaiyawan business family, is likely to issue new shares as part of the deal, while the founders are also expected to sell part of their stake, the sources said. A minority holding may be less attractive to some suitors, although Japanese insurers in the past have shown a willingness to buy non-controlling stakes.

Thai Life's Duangduen Kongkasawad, executive vice president for communications, told Reuters that the company has no plan to sell a stake to a strategic partner.

But the sources told Reuters that the company is expected to launch the sale in the first quarter of next year and is working with Barclays as an adviser.

A Hong Kong-based Barclays spokesman declined comment.

Thai Life had 15.3 percent of the country's life insurance market with annualized premium equivalent of 6.2 billion baht ($202 million) as of the end of the second quarter, according to Thai Life Assurance Association data.

It trails industry leader AIA Group Ltd which had 20.4 percent, while third-ranked Muang Thai Life Assurance Co Ltd is close behind with 15.1 percent.

Underinsured

Foreign insurers, particularly heavyweights like AIA and Prudential, are attracted by Southeast Asia, which accounts for less than 0.25 percent of the world's insurance market, according to research by Norton Rose.

Thailand is among the most underinsured nations in Southeast Asia, with only 25 percent of the country's population of 65 million currently owning life insurance.

It has an insurance sales to gross domestic product ratio of 2.7 percent, compared with 3.3 percent for Malaysia and 4.3 percent for Singapore, according to Fitch Ratings.

But it is also seen as one of the fastest growing life insurance markets in the region.

Fitch estimates Thailand's life insurance industry grew 17.5 percent in the first seven months of 2012 to around $6.9 billion, and adds that the sector is supported by steady premium growth, robust capitalization with zero leverage and a conservative investment mix.

Swiss Re forecasts life insurance premiums in Thailand to grow 6 percent in 2013, compared with 4.5 percent growth forecast for the whole of Asia.

Unlisted Thai Life Insurance was established in 1942 when a group of Thai citizens and high-ranking officials came together to support the industry after foreign insurers deserted the country due to the Second World War, according to the company website.

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