Life insurance firm deals SET hopes a blow

October 6, 2000

JUST as authorities attempt to woo more companies to list on the Stock Exchange of Thailand, Ayudhya CMG Life Assurance has dealt a blow to their efforts - by applying to de-list.

Yesterday the company, a joint venture between the Bank of Ayudhya and CMG Asia of Australia, informed the stock exchange it would raise capital by Bt500 million, taking it to a total of Bt1.91 billion, and then intended to de-list.

Ayudhya CMG Life Assurance spokeswoman Nuansri Withayasricharoen said: "The insurance business is capital intensive.

"And each time we raise capital, it creates financial burden for small investors.

"So we're planning to de-list."

Ayudhya CMG has promised to buy back its shares from small investors at Bt10 a share.

BAY and CMG Asia, a subsidiary of the Commonwealth Bank of Australia, presently control about a combined 93 per cent of Ayudhya CMG.

Small shareholders own the remaining 7 per cent, making the insurance company's stocks quite illiquid in the market.

"This decision is to facilitate Ayudhya CMG's continued business growth in Thailand and will have little impact on operations. However, the de-listing will not affect the company's policyholders whatsoever," the insurer's statement said.

Under the recapitalisation plan, Ayudhya CMG will issue 50 million shares at Bt10 each, the same level of its stock par value.

The rights issue will be offered on the basis of one new share for every 2.805 shares held.

The company said the fresh capital would be used to expand its insurance business in an attempt to win a greater market share.

Ayudhya CMG Life Assurance said it would seek approval of its plans at a shareholders' meeting on November 9.

The company's books would be closed from October 20, it said.

Shares of Ayudhya CMG were last traded on September 29 at Bt10.

Nuansri said the insurance business was long-term in nature and required huge amounts of capital to operate.

She said for every Bt100 it took from policyholders in its first year of operation, there were subsequent operational costs of Bt120.

"The costs fall in the second year and it is not until the fifth year [of operation] that we begin to make profit," she said.

As a result of a constant need to recapitalise, she said it was better for the company to de-list.

Currently, Ayudhya CMG has a customer base of 300,000, making it Thailand's third-largest insurance company, after AIA and Thai Life Insurance.

Last year, its insurance premiums totalled Bt3.64 billion.

BY THANONG KHANTHONG