02 July 2019

FWD ensures growth with Thailand’s biggest-ever insurance acquisition

FWD has snagged two different companies within the space of a weekend as the insurance arm of Richard Li’s Pacific Century Group (PCG) has talked Metlife into handing over its Hong Kong arm and the following Monday announced plans to acquire Siam Commercial Bank’s entire stake in SCB Life Assurance. The value of the acquisition in Hong Kong was not disclosed but Bloomberg has previously suggested would be less than an embedded value of around USD 400 million and the SCB Life Assurance deal is worth THB 92,700 million (USD 3,007 million), which Zephyr, the M&A database published by Bureau van Dijk, shows is Thailand’s largest-ever insurance acquisition and the ninth-largest on record targeting the sector in Asia Pacific.

The deals are notable as FWD, which is believed to be gearing up to hold an initial public offering next year, has already carried out numerous acquisitions in Asia since PCG officially completed the purchase of the Hong Kong business of Dutch giant ING in 2013 and changed the name of the operations to FWD. At the time, PCG said the deal marked the first step in plans to establish a world-class pan-Asian insurance platform to capitalise on the long-term potential of the sector, and that same year brought on board Swiss Re as a long-term minority shareholder following an investment of up to USD 425 million in exchange for a 12 per cent stake.

In the following six years, FWD has pursued PCG’s vision of becoming a pan-Asian business by entering into agreements to acquire: a 90.0 per cent stake in Shenton Insurance from HH Healthcare’s indirect subsidiary Parkway; Great Eastern Life Vietnam from the Great Eastern Life Assurance; American International Group’s Japanese operations, AIG Fuji Life Insurance; Commonwealth Bank of Australia’s majority stake in Commonwealth Life of Indonesia; and a 49.0 per cent of HSBC Amanah Takaful Malaysia. Today, FWD’s operations span Hong Kong and Macau, Thailand, Indonesia, the Philippines, Singapore, Vietnam, Japan and Malaysia and its product line comprises life and medical insurance, general cover, employee benefits, and Shariah and Family Takaful products. The latest acquisitions, of Metlife and SCB Life Assurance, will increase the group’s market share in Hong Kong and reinforce its position as a leading insurer in the city while the agreement with Siam Commercial Bank coincides with a long-term bancassurance distribution partnership.

A wave of consolidation has swept over the global insurance industry in the last couple of years as mergers and acquisitions targeting companies in the sector in 2018 reached an all-time high of 1,863 deals worth a combined USD 228,445 million, up from 1,435 totalling USD 183,083 million in 2017 and from 1,725 aggregating at USD 91,169 million in 2016, according to Zephyr. While the volume of insurance deals announced in 2019 to date has already exceeded that for the same timeframe in 2018, aggregate value has only reached USD 42,678 million. Saying that, 2019 value is being supported by ten deals each worth more than USD 1,000 million, including the FWD acquisition of SCB and Norges Bank’s purchase of a 3 per cent stake in Allianz in May for USD 3,016 million. Other high-value targets include Japan Post Insurance, Vivat, AXA and Convex, among others, and North America and Western Europe continue to be the main target regions by volume in 2019.

With regards to M&A dealmaking in the insurance sector, reports from earlier this year suggest activity is not expected to tail off, though whether it reaches the heady heights of 2018 is anyone’s guess as there are still another six months on the calendar.

© Zephyr