Siam Commercial Bank - Bancassurance

AIA Group and Britain's Prudential PLC are among insurers considering bids to buy at least 49 percent of the $3 billion insurance unit of Thai lender Siam Commercial Bank (SCB) , people with direct knowledge of the matter said.

A successful stake sale in SCB Life Assurance Public Company Limited would make it one of Southeast Asia's biggest insurance transactions ever. The deal would also allow the new partner to distribute insurance products through the branch network of SCB, Thailand's third-biggest lender.

While the sale process is only expected to kick off in the third quarter of 2016, the insurers have started preliminary discussions with potential advisers for prospective bids, the people told Reuters. The list of interested insurers also includes Swiss ACE Group and Canada's Manulife Financial Corp , they said.

Southeast Asia is a battleground for foreign insurers, who are attracted by the region's lower insurance penetration levels and faster growth rates of life insurance premiums compared to levels in the developed world.And bank distribution deals, termed bancassurance, are emerging as a popular means to sell insurance products in Asia, complementing the more commonly used agency channel route.

AIA, Aviva, Prudential and Canadian insurers Manulife and Sun Life Financial Inc have bitterly fought every time a bancassurance deal has come to the market in Asia in recent years.

SCB, with its 1,200 domestic outlets, offers one of the last meaningful bank distribution deals available in Southeast Asia. The lender is seeking a partner for the insurance unit to accelerate growth in the business.

GROWTH POTENTIAL

Thailand, with a population 65.7 million, trails Southeast Asian markets such as Singapore and Malaysia in insurance penetration.
Total life insurance premium income in the country is forecast to grow by 9 percent to 585.7 billion baht ($16.40 billion) in 2016 after rising by 6.7 per cent last year, the Thai Life Assurance Association has said.

Insurers "see growth potential in Thailand - big population and simple products at the moment," one of the people said.

SCB is working with Morgan Stanley and Credit Suisse on the sale process, the people said.

The people declined to be identified because details of the sale process and names of potential buyers are not public.

Spokespeople for Manulife, Prudential, AIA, ACE, Morgan Stanley and Credit Suisse declined to comment.

SCB did not respond to several Reuters requests for comments. In the past it has declined to comment on the process.

SCB Life is ranked fifth in Thailand's life insurance market, which AIA leads. Other major players are France's AXA , which has a deal with Krung Thai Bank, Prudential, which has tied up with Thanachart Bank, and Bangkok Life.

Southeast Asia's biggest insurance deal so far is AIA's $1.73 billion purchase of Dutch lender ING's Malaysian insurance business in 2012.

Thailand caps foreign companies' stakes in domestic insurance ventures at 49 percent, but may permit higher holdings on a case-by-case basis