Muang Thai Insurance president Nualphan Lamsam, left, Phatra Insurance president Kritaya Lamsam, right, and Photipong Lamsam, chairman of both companies, pose for photos after announcing plans to merge the two firms yesterday.

The merged company is expected to achieve Bt7 billion in annual premiums and become the leader in both the motor and non-motor insurance markets within five years.

According to rough calculations based on figures from Phatra and Muang Thai's 2006 operations, the new company will immediately rank in the top five in terms of premiums and seventh in terms of book value.

The major stakeholders in the new company will be the Lamsam family with 40 per cent, Benelux-based Fortis with 11-13 per cent and Kasikornbank with 7 per cent, while 25 per cent of the total shares will be floated on the Stock Exchange of Thailand.

Phatra Insurance president Kritaya Lamsam said that legalities were being worked out to decide the new company's executive structure, name and other details, all of which would be finalised by March next year. Both companies will also have to obtain approval for the move from at least 75 per cent of their shareholders before then.

Muang Thai Insurance president Nualphan Lamsam said the merger would integrate both parties' business strengths, such as Phatra's expertise in fire insurance and Muang Thai's in auto insurance.

"Phatra has bancassurance and telemarketing while Muang Thai has branches and brokerage strength. The merging of operations will help the new company generate more profit from underwriting with larger sales and pooling of reserve portfolios," she said.

Both companies will return their insurance licences to the Insurance Department and ask for a new licence to set up the new company.

Phatra's board has approved setting aside Bt1 billion to pay shareholders a dividend of Bt50 per share,

and to give them the right to exercise on shares in the new company at one existing share for 1.9588 new shares.

Phatra's securities stock rose 9.66 per cent from Bt176 to Bt193 on Friday.

While Muang Thai has yet to decide whether to pay shareholders a dividend, they will receive the right to exercise on the new company's shares at one existing share for 0.5 new share.

Phatra, ranked 31st overall in terms of premiums among the 75 insurers in Thailand, has been operating for more than six decades and focuses on only non-motor insurance. Muang Thai, ranked 16th, is an innovator in motor products.

Phatra has assets worth Bt3.6 billion and Muang Thai Bt2.1 billion.

Given the tough competition in the insurance industry, it no longer made sense to run the businesses separately, said Photipong Lamsam, founder of Muang Thai Insurance, which was split into life and non-life businesses due to a new law in 1998, and currently chairman of Phatra and honorary chairman of Muang Thai.

Chainarong Rojanasintu, director of Phatra Securities' Investment Banking, said this was the first merger in the insurance sector to use the amalgamation method.

"After scrutiny, this method fit. Both companies have no debt except for the liabilities set aside for reserves. This method also saves the companies Bt10 million in asset transferral fees that would be charged in the acquisition method. Amalgamation will combine their operations into one," he said.

LMG Insurance acquired Khoom Khao Insurance a couple of years ago, but the process is expected to take another few years to complete as they are still operating separately.

Piyarat    Setthasiriphaiboon

The Nation