Bangkok--29 Jul--Fitch Ratings
Last week’s agreement by Japan’s Meiji Yasuda Life to acquire a minority stake in Thai Life Assurance (TLI) highlights the growth prospects that the Thai life insurance industry offers to foreign investors, Fitch Ratings says. We expect further M&A 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 a 14% compound annual growth rate during 2007-2012, and by a strong 19% in 2012. Growth potential is further enhanced by total insurance premiums (life and non-life) in Thailand at around 4.4% of 2011 GDP, less than in Singapore and Malaysia, although higher than in Indonesia and the Philippines.
We believe foreign partnerships could strengthen Thai life insurers’ technical expertise, as well as supporting their aspirations for potential growth in the ASEAN region. Among the six leading Thai life insurers, who account for 80% market share in 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) in Q213. We believe the remaining local life insurers may also look for strategic alliances. So there could be further M&A, although the 25% cap for foreign participation means that overseas partners are likely to be minority shareholders.
TLI is the second-largest life insurer in Thailand in terms of assets and premiums, including agency. However, the 15% capital investment (JPY70bn according to media reports) by Meiji Yasuda (IFS A/Stable) is likely to have negligible impact on the Japanese group's credit profile, as it held JPY3.6trn of total net assets and other reserves at end-March 2013. This transaction follows its initial investment in Indonesian life insurer, Avrist Assuance, in 2010, and a subsequent increase in its stake in 2012.
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 south-east Asia, hoping to capture growth potential. Dai-ichi invested in Indonesian Panin Life in June 2013. Sumitomo Life also invested in Vietnam's financial group Bao Viet Holdings in December 2012.