Meiji Yasuda move signals hopes for life-insurance sector
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Last week's agreement by Japan's Meiji Yasuda Life to acquire a 15-per-cent stake in Thai Life Insurance (TLI) highlights the growth prospects that the Thai life-insurance industry offers to foreign investors, according to Fitch Ratings.
It expects further merger and acquisition deals as Asean life insurers build their regional franchises.
Foreign investors are attracted by the relatively low penetration, growing middle-income segment and bancassurance opportunities in the Thai life-insurance market.
Life premiums grew at 14 per cent per year from 2007 to last year and by a strong 19 per cent last year alone. Growth potential is further enhanced by life and non-life insurance premiums in Thailand of 4.4 per cent of 2011 gross domestic product – less than in Singapore and Malaysia, although higher than in Indonesia and the Philippines.
Foreign partnerships could strengthen Thai life insurers’ technical expertise and support their aspirations for potential growth in Asean.
Among the six leading life insurers, which account for 80 per cent of total premiums, three local companies including TLI have partnerships with leading foreign insurers. Transactions have picked up recently with Meiji Yasuda’s deal and the takeover of Thanachart Assurance by Prudential Life (Thailand) last quarter.
“We believe the remaining local life insurers may also look for strategic alliances. So there could be further M&A, although the 25-per-cent cap for foreign participation means that overseas partners are likely to be minority shareholders,” Fitch said.
TLI is the second-largest life insurer by assets and premiums, including agency. However, the 70-billion-yen (Bt22 billion) investment, according to media reports, by Meiji Yasuda is likely to have only a negligible impact on the Japanese group’s credit profile, as it held 3.6 trillion yen of total net assets and other reserves in March.
This transaction follows its investment in Indonesian life insurer Avrist Assuance in 2010 and an increase in its stake last year.
“We expect Japanese life insurers to be key candidates for M&A activity in the Asean region. The four largest – Nippon, Meiji Yasuda, Dai-ichi and Sumitomo Life – have been seeking opportunities in Southeast Asia, hoping to capture growth potential,” Fitch said.
“Dai-ichi invested in Indonesian Panin Life in June. Sumitomo Life also invested in Vietnam’s financial group Bao Viet Holdings in December.”
