SET-listed Siam Commercial Bank (SCB) has entered into a binding agreement to sell 99.2% of subsidiary SCB Life Assurance to insurer FWD Group Financial Services for 92.7 billion baht, marking Southeast Asia's biggest life insurance acquisition deal.
After the share sale is completed, the bank and the Hong Kong-based insurance firm, owned by a son of tycoon Li Ka-shing, will enter into a 15-year bancassurance agreement, enabling FWD to sell life insurance products through SCB, according to the bank's filing with the Stock Exchange of Thailand.
"Subject to completion of the share sale, SCB will receive a total amount of 92.7 billion baht along with additional payments common in bancassurance transactions over the course of the bancassurance partnership," the bank said.
The share sale is expected to be completed later this year, depending on certain conditions such as approval from regulators and the bank's shareholders.
SCB, Thailand's largest lender by assets, in March informed the SET that it had entered into exclusive negotiations with FWD to finalise terms of the acquisition of the life insurance unit.
After completion, SCB Life's customers will not be affected by the transfer of ownership to FWD and will continue to receive protections, benefits and customer services in accordance with the terms of their policies. All existing SCB Life policies will continue to be honoured by FWD once the transaction is done.
SCB holds about 66 million shares in SCB Life.
Arthid Nanthawithaya, SCB's chief executive, said SCB Life has millions of policyholders and contributes 6 billion baht a year on average to the bank.
"The deal is more valuable to SCB than running SCB Life itself, and the deal will generate more than 6 billion baht a year to the bank," Mr Arthid said after a signing ceremony.
Income generated from the share sale will be realised this year, he said.
Presently, SCB's customer base totals 16 million while SCB Life has several million policyholders. There are 2.2 million FWD policyholders in Thailand.
Proceeds from the share sale will be used for future investment, depending on business opportunities.
Partnership and organic growth are the bank's key strategies for business expansion both locally and internationally, Mr Arthid said.
The bank is in talks with Chinese companies regarding a potential partnership in the payment business and digital lending, Arak Sutivong, co-president of SCB, said without revealing names.
Meanwhile, Huynh Thanh Phong, chief executive of FWD Group, said FWD is exploring other investment opportunities in Thailand.
"Thailand is our key market in the region, with high growth potential for both the economy and the industry," he said.
The company plans to adopt a digital platform for life insurance business expansion in the Thai market to keep pace with customer demand.
FWD operates in Thailand, Hong Kong, Macao, Vietnam, Philippines, Malaysia, Singapore, Indonesia and Japan. In 2013, FWD acquired ING's insurance business in Thailand.
SCB closed on Monday on the SET at 141 baht, up 1.50 baht, in trade worth 6.99 billion baht.