SM Group-led China Bank plans to raise its interest in Manulife China Bank Life Assurance Corp. (MCBL) to 40 percent from 5 percent in order to unlock more value from the growing volume of business in its bancassurance partnership with global insurer Manulife Financial Corp.
In a disclosure to the Philippine Stock Exchange on Thursday, China Bank said its board had authorized the bank to increase its capital stake and contributed surplus in MCBL to 40 percent, and for this purpose, to negotiate the purchase of the corresponding shares of stock from Manulife.
When China Bank entered into a bancassurance partnership deal with Canada-based Manulife in January 2007, it’s really part of the roadmap for the local bank to eventually acquire a larger stake in the firm, Alex Escucha, China Bank senior vice president for strategic planning and investor relations, said in an interview.
The 5-percent initial stake acquired by China Bank in MCBL in 2007 was only the minimum equity ownership needed by banking regulators to allow bancassurance activities or the cross-selling of insurance products.
“The idea is to enhance the value derived from the partnership,” Escucha.
Right now, Escucha said the main benefit through bancassurance was that Manulife could sell insurance to China Bank clients and the bank could in turn earn fees from commissions. But with a bigger equity stake, he said China Bank could earn more from the partnership.
At present, he said China Bank was already getting “very significant” fee-based revenues from this partnership amounting to “several hundred million pesos.”
“But now that both parties realize how mutually beneficial that partnership is, that paves the way for us to bring this partnership to the next level,” Escucha said.
The board authorized China Bank senior executive vice president Ricardo Chua to represent, sign, execute and deliver on behalf of the bank, any and all documents and papers necessary to effect the increase in capital stake and contributed surplus in MCBL.
MCBL provides a wide range of innovative insurance products and services to China Bank customers.
Manulife, which is among the world’s largest life insurance companies by market capitalization, is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. Doris C. Dumlao