Richard Li's FWD pays record US$3 billion for life insurance unit of Thailand's Siam Commercial Bank

FWD Group, the insurance unit of Hong Kong tycoon Richard Li Tzar-kai's Pacific Century Group, has agreed to buy SCB Life Assurance, the life insurance business of Thailand's Siam Commercial Bank, for 92.7 billion Thai baht (US$3 billion), reflecting the largest insurance deal in Southeast Asia in terms of value.

Li is the younger son of Li Ka-shing, Hong Kong's richest businessman.

The deal, signed on July 1, is the latest in a string of mergers and acquisitions by FWD across Asia. It comes just three days after FWD announced an agreement to buy MetLife's Hong Kong business.

The Siam Commercial Bank said it has signed a binding share sale agreement with FWD for the sale of its entire stake in SCB Life Assurance.

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As part of the deal, the two parties agreed to establish a long-term partnership for the distribution of insurance products. Under this arrangement, FWD's life insurance products will be made available to Siam Commercial Bank's customers in Thailand for 15 years.

"The bancassurance business remains a key long-term strategic priority for us," said Siam Commercial Bank chief executive Arthid Nanthawithaya.

He said the distribution partnership will help create significant long-term value for the bank's customers.

At completion, the transaction will be the largest ever in Southeast Asia in terms of value, the announcement said.

The deal will fuse synergies between the two groups, including FWD's innovative insurance products and digital capacities and Siam Commercial Bank's large customer base and distribution network, the announcement said.

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"Our partnership with SCB covers all product categories that a life insurer can manufacture, including accident and health policies," a FWD spokeswoman said.

Analysts said the acquisition, the eighth by FWD in the in the past five years, will help pave the way for a listing in either Singapore or Hong Kong.

"As FWD looks to expand its activities, we will assess appropriate avenues for fundraising, including accessing capital markets. This is a decision that will be made by our shareholders and our board," the spokeswoman said.

Richard Li Tzar-kai is believed to have held preliminary discussion last year with investment bankers over a possible listing of FWD Group. Li is chairman and chief executive of Pacific Century Group, which owns a majority stake in FWD: Photo: Felix Wong alt=Richard Li Tzar-kai is believed to have held preliminary discussion last year with investment bankers over a possible listing of FWD Group. Li is chairman and chief executive of Pacific Century Group, which owns a majority stake in FWD: Photo: Felix Wong

Assuming that the MetLife deal was worth around US$400 million, FWD will have spent at least US$3.76 billion in eight acquisitions spanning Singapore, Vietnam, Indonesia, Malaysia, Hong Kong, Thailand, and Japan in the past five years, according to data provider Dealogic.

"FWD is obviously using the mergers and acquisitions strategy as a short cut to building up a big portfolio of businesses across Asia," said Gordon Tsui Luen-on, managing director at Hantec Pacific. "There are market rumours that FWD is planning to have an IPO to raise funds to expand the business further."

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Bloomberg reported in June last year that FWD had held preliminary discussions with investment banks about a possible IPO in either Singapore or Hong Kong over the next few years.

In 2012, Pacific Century Group spent US$2.14 billion to buy ING's insurance and pension units in Hong Kong, Macau and Thailand. These assets were renamed FWD Group in 2013. The insurer now has more than 2.8 million customers across Asia.

Swiss Re, the world's second-largest reinsurance company, also has a minority stake in FWD.

"As FWD has purchased a lot of Southeast Asian insurance companies in recent years, a listing in Singapore would make sense as investors would be more familiar with these Southeast Asian companies. However, as the Li family is well known in Hong Kong and international investors are familiar with the Hong Kong stock market, it is possible FWD may choose to list in Hong Kong," Tsui said.

Chan Kin-por, a Hong Kong lawmaker who represents the insurance sector, expects more M&A activity in the insurance industry worldwide.

"It is not just Hong Kong, but globally," Chan said. "New regulations have added to the compliance costs and capital requirements for insurance companies. The small players would opt to sell their business to the bigger players. There will be more consolidation in the insurance industry in the next few years."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.