ACE, a NYSE-listed multiline property and casualty insurer with operations in 54 countries, said on Monday it plans to buy Siam Commercial Samaggi Insurance for about $185 million.
Global insurers see Southeast Asia as their sweet spot given the potential for growth due to low penetration rates in the region’s fast-growing economies. Last year insurance M&A in the region totaled $2.6 billion across 24 deals according to data provider Dealogic.
Reinsurer Swiss Re estimates that life insurance premiums in 2014 will grow 9.9% across the emerging economies of Asia – well above its estimate of 3.9% globally. Swiss Re forecast life insurance and non-life premiums would both grow at 6% in Thailand this year.
ACE is not alone in snapping up assets in Thailand. The UK's Prudential completed its purchase of Thailand’s Thanachart Life Assurance from Thanachart Bank Public Company in May last year. Pru and Thanachart Bank also entered into an exclusive 15-year bancassurance tie-up.
ACE already has a Thai business focused on industrial commercial property and casualty, accident and health, and life.
“This transaction presents an excellent opportunity for ACE to further build our business in this fast-growing market by expanding our presence in personal and small commercial insurance,” said Evan G. Greenberg, ACE’s chairman and chief executive.
Written premiums generated in the Thai personal accident and health insurance segment accounted for 15% of the overall insurance industry's gross written premium in 2012, and grew between 2008 and 2012 at a compound annual rate of 12.1%.
Greenberg said that ACE intends to grow the number of products and services offered through Siam Commercial Samaggi Insurance. He said the deal would immediately be accretive to ACE’s earnings.
The acquisition will be in two stages: ACE will first purchase a 60.9% stake from Siam Commercial Bank at 27.60 baht a share. When that closes ACE and its local Thai partner will make a mandatory tender offer for the remaining 39.1%.
Shares in Siam Commercial Samaggi Insurance gained as much as 13% to 26.50 baht on the Stock Exchange of Thailand by midday on Monday.
Established in 1947, Bangkok-based Siam Commercial Samaggi Insurance writes auto, small commercial and personal accident insurance policies and distributes its products through both Siam Commercial Bank`s branches and independent agents across the insurer`s own extensive branch network.
In 2012, the insurer wrote about $138 million in gross premiums.
"Our Thai operations and Samaggi's businesses are highly complementary: Samaggi's current focus is personal lines (auto & home), small commercial business and bank distributed Accident & Health (A&H) while our operations focus on direct marketing and telemarketing distributed A&H and large commercial lines business," said Juan Luis Ortega, ACE’s regional president for Asia Pacific in an emailed response to an enquiry from FinanceAsia.
ACE sees the first stage of the transaction completing during the second quarter of 2014 and is subject to regulatory approval, due diligence and Siam Commercial Bank shareholder approval.
Barclays advised Siam alongside Siam Commercial Bank’s investment banking arm; meanwhile Citi advised ACE.