Thanachart deal to give Prudential 3.5 per cent of Life Insurance market: Moody's
Prudential's partnership with Thanachart Bank is expected to more than double the insurer's market share in Thailand from 1.3 per cent to 3.5 per cent, Moody's Investors Service has said. "Prudential was under-represented in Thailand relative to its
Last Monday, Prudential signed an exclusive 15-year bancassurance agreement with Thanachart Bank. Under the deal, Prudential will acquire 100 per cent of Thanachart Life, a wholly owned life-insurance subsidiary of Thanachart Bank, for 368 million euros (Bt14.33 billion). The deal is credit positive for Prudential because it will double its market share in Thailand. And it is consistent with its multi-channel distribution strategy and provides further scope to leverage Thanachart Bank’s 4 million customers and more than 630 branches.
The partnership with Thanachart Bank is in line with Prudential’s strategy of focusing on fast-growing, under-penetrated insurance markets in Southeast Asia.
Moody’s expects Thailand’s real GDP to grow 5.5 per cent this year and 4.5 per cent in 2013. The life insurance penetration rate is also low, providing opportunity for growth.
“We expect the transaction to increase the amount of intangibles on Prudential’s balance sheet, which we regard more negatively. Nonetheless, we expect the purchase to have only a marginal effect on the group’s capitalisation, given its small relative size [1.7 per cent being the purchase price over the market capitalisation of Prudential as of November 7],” it said.
Bancassurance has become the most common expansion strategy for European insurers operating in Asia. Last month, Allianz SE signed a 10-year life insurance distribution agreement with HSBC Holdings in Asia and this week AXA closed a similar transaction with HSBC for non-life distribution in Asia and Latin America.
Over the past 10 years, banc-assurance distribution has grown considerably faster than the agency channel in Asia and now accounts for a large proportion of new life insurance premiums in many countries. In Thailand, it was close to 50 per cent of the total of new life insurance premiums. The growing importance of banc-assurance in the region vis-a-vis agents is due to the banks’ large footprint via their branches and the potential to move a part of customers’ savings from banking to life insurance products.
