Canadian insurer Manulife Financial Corp has signed a $1.2 billion (£803 million) agreement with Singapore's DBS Group Holdings Ltd for a 15-year partnership that will allow the insurer to sell products through the bank's network in Asia.
Manulife will pay the amount upfront to the Singaporean bank, and there will be variable payments based on the success of the partnership, the two companies said in a statement.
The agreement – which includes the lender's 200 branches in Singapore, Hong Kong, China and Indonesia - will take effect on January 1st, 2016.
Joining with DBS “accelerates our growth in Asia, deepens and diversifies our insurance business, and gives us access to a much wider range of customers,” said Donald Guloien, chief executive of Manulife, in a statement Wednesday.
Bancassurance deals on the rise
“We are already working with Manulife in Singapore, Hong Kong and Indonesia, and will soon be their flagship regional bancassurance partner and their largest bancassurance partner globally,” said Piyush Gupta, chief executive of DBS. “Bancassurance is a key focus for DBS and an important part of our overall customer value proposition.”
The agreement is known as a bancassurance deal, which means the insurance products are distributed through a bank’s branch network rather than through individual insurance agents.
The bancassurance model is considered more lucrative than the traditional agency model for both banks and insurers as it remove the needs to build new branches. The sales synergies – such as selling insurance together with some banking products – have been sufficient to be used in the past to justify mergers and acquisitions.
Other large global insurers such as Prudential PLC, BNP Paribas and MetLife Inc. are already involved in this market, along with HSBC Holdings PLC, which sells its own insurance products through its banking network. Manulife has also set up several bancassurance deals previously.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.