Thailand’s Adyudhya to Acquire BT Insurance

Seeking to enhance its market position in Thailand, Ayudhya Insurance Public Co. Ltd. [089377] has agreed to pay 392 million baht (US$12 million) to acquire BT Insurance Co. Ltd. from CIMB Thai Bank plc.

As part of the deal, Ayudhya and CIMB will enter into a 10-year bancassurance arrangement to sell existing BT Insurance and Ayudhya nonlife insurance products at CIMB branches in Thailand. The final acquisition price will be determined at the close of the transaction, according to Ayudhya.

The 99.99% stake acquisition of BT Insurance would "automatically increase our share of nonlife insurance market in Thailand," said Rowan D'Arcy, president and chief executive of Ayudhya.

"Considering the positive long-term economic growth trend and the government's continuing policy to promote insurance through various measures, we believe there's a bright future for the insurance industry," said D'Arcy.

The company "intends to be among the first to build on these opportunities," added D'Arcy. Thailand's low insurance penetration compared with other Asian countries has created growth potential in the market, he said.

In 2008, Thailand had total nonlife premium income of 139 billion baht, up 7% from the previous year, according to Swiss Re's world insurance sigma report. The country's insurance penetration (premiums as percentage of gross domestic product), was 3.3%, including 1.5% for nonlife insurance and 1.8% for life. Insurance penetration worldwide in 2008 was 7.1%, with 4.1% for life and 2.9% for nonlife insurance.

Both Ayudhya and BT Insurance will continue normal operations until the transaction is completed.

The transaction is subject to regulatory approval by the Office of the Insurance Commissioner and shareholders of Ayudhya. It is expected to be complete by June, said Ayudhya in a statement.

Thailand plans to implement a risk-based capital regulatory regime, a move that is expected to trigger market consolidation in the insurance sector.

"With tighter regulation and heightened competition in the insurance industry, only the top players will be able to continuously innovate and grow their business," said Subhak Siwaraksa, president and CEO of CIMB Thai.

"While BT Insurance is a profitable company with strong management, its business fits perfectly with that of a stronger player like Ayudhya," said Siwaraksa in a statement.

Ayudhya and BT Insurance will achieve greater synergies through this acquisition, said D'Arcy. "We are confident of providing better return on investment to investors and mutual benefits to all stakeholders," he added.

The sale is in line with CIMB group's strategy to leverage the expertise of top insurance companies and focus on its distribution capabilities. Siwaraksa said the bank will distribute a wide range of insurance products and services through its 147 branches.

Publicly listed Ayudhya, which is 16.84% owned by Germany's Allianz S.E. [085014], reported gross premium income of 1.8 billion baht for 2009, up from the previous year's 1.7 billion baht. With total assets of 6.3 billion baht, its underwriting profit was 432 million baht and net profit was 357 million baht.

Established in 1982, BT Insurance had total written premiums of 265 million baht and net profit of 34 million baht in 2009. Its total assets stood at 619 million baht.

(By Iris Lai, Hong Kong bureau manager: [email protected])