Siam Commercial Bank (SCB) is selling its life insurance unit while beefing up its private banking business, a strategic decision that makes the bank cash-rich and strongly positioned to focus on the ultra high net worth (UNHW) market.

The sale of SCB Life Assurance Public Company Limited (SCB Life) to the Hong Kong-based Group Financial Services Pte. Ltd. (FWD), the insurance unit of Hong Kong tycoon Richard Li Tzar-kai's Pacific Century Group, brings in US$3 billion for the Thai bank. As part of the sale, SCB will enter into a 15-year distribution agreement with FWD to distribute FWD’s life insurance products to the bank’s customers in Thailand through its distribution channels.

The SCB-FWD transaction happens less than a week after FWD announced on June 28 its acquisition of the MetLife Limited and Metropolitan Life Insurance Company of Hong Kong Limited (collectively known as “MetLife Hong Kong”) from US insurer MetLife Inc. The terms of the deal were not disclosed. Li is reportedly considering listing FWD in Singapore with a dual-class structure as the firm prepares for its much-awaited initial public offering (IPO).

For SCB, the lucrative sale of its insurance unit follows a joint venture with Zurich-based bank Julius Baer (BJB) announced on March 8, designed to jumpstart the Thai bank’s position in the fast-growing private banking business.

Unlike other private banking alliances between a Swiss private bank and an Asian partner, the BJB-SCB joint venture (JV) is a standalone business where both partners are putting in capital. BJB is initially taking a 40% stake in the JV with an option to increase to it 49%.

The BJB-SCB joint venture aims to combine SCB’s strong brand credibility and wealth management expertise with Julius Baer’s suite of international wealth management capabilities and advisory services. It will operate via domestic and international companies in Thailand and Singapore, respectively, thus providing it with international capabilities that are way ahead of other Thai banks.

Meantime, the FWD acquisition of SCB Life is reputedly the largest insurance transaction in Southeast Asia in terms of the total value. SCB will receive a total deal amount of 92.7 billion baht (US$3 billion) along with additional payments common in bancassurance transactions over the course of the Bancassurance Partnership. The transaction is expected to be completed in the latter part of 2019 subject to certain conditions, such as obtaining regulatory approvals and approval by the bank's shareholders.

Following completion, SCB Life's customers will not be affected by the transfer of ownership to FWD and will continue to receive protections, benefits and customer services in accordance with the terms of their policies. All existing SCB Life policies will continue to be honored by FWD after the closure of the transaction.

SCB’s focus on the private banking business is understandable given the fast growth of Thailand’s wealth management market which is estimated to be around US$300 billion, with a rapidly growing population of high net worth individuals of approximately 30,000, according to the BCG Global Wealth Report 2017.

Demand for sophisticated wealth management services and global investment strategies is also expanding quickly. As the largest commercial bank in Thailand, SCB has been serving wealthy clients since 1907 with over US$23 billion in AUM. SCB has more than 13 million clients across Thailand.