Siam Commercial Bank seeking foreign partner for its insurance arm

A deal could give the life insurance business a valuation of at least US$3b.

In a recent news report by Bloomberg, Siam Commercial Bank Pcl (SCB), Thailand’s 3rd largest lender, has started gauging interest for its life insurance operations in a deal that could involve bringing in a foreign partner.

The article reports that the Bangkok-based lender has sent out nondisclosure agreements to potential suitors and plans to distribute preliminary financial information about SCB Life Assurance Pcl next month.

A deal could give the life insurance business a valuation of at least US$3b. Siam Commercial Bank has been considering selling a stake in the unit as well as granting rights to sell insurance products through its branches.

Here are Maybank Kim Eng's comments:

This news suggests that the deal to find a partner for SCB Life is ongoing, in line with our expectation. The management also reiterated this in the latest analyst meeting last month.

SCB holds 99.4% of SCB Life worth THB12.5b (USD350m), based on a cost-basis approach. If both parties agree to value the firm at the aforementioned price of USD3b, this means the buyer would pay USD1.5b (THB50b) for the 49% stake in SCB Life. Thus, SCB could book an after-tax gain of THB35b, almost equivalent to its THB47b in net profit last year.

We note that the price may look expensive in terms of P/BV. But the book value here for calculation is cost-basis and the current market price of the enterprise could be higher than that. Moreover, the foreign insurer acquiring the stake would benefit as it would have access to SCB’s 1,170 branches throughout Thailand.

The deal size is pretty big and likely will not be finalized soon. However, the news will provide an additional catalyst to SCB, which already has a brighter operational outlook.

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