IC rejects Manulife PH’s planned merger of life, pre-need units
Insurance Commissioner Dennis Funa has ruled against a planned merger of the local life and pre-need units of Canadian insurance giant Manulife.
The Insurance Commission (IC) “cannot legally allow the merger of Manufacturers Life Insurance Co. Inc. (Manulife Philippines), a life insurance company, and Manulife Financial Plans Inc. (MFP), a pre-need company,”Funa said in a legal opinion dated Aug. 25.
“Unless the authority for a particular merger is found in the laws governing the constituent corporations, statutory merger between the said two corporations is not possible,” Funa said.
The IC oversees both the insurance and pre-need industries.
He said there was no provision in the Amended Insurance Code of the Philippines and the Pre-Need Code of the Philippines that expressly allowed the merger between an insurance company and a corporation with different lines of business such as pre-need business.
“Issuances by [the IC] as regards mergers and acquisitions only provide guidelines on the merger or consolidation of two or more companies with the same line of business,” Funa said.
Manulife Philippines and MFP, he said, were being encouraged to submit alternative proposals regarding their corporate group restructuring plan.
Funa said the IC, Manulife Philippines and MFP had been meeting and communicating since January of this year about these companies’ plan to merge, with the life insurer as the surviving entity.
“Manulife Philippines and MFP believe their merger will be beneficial to both companies since operational costs of managing a separate entity would be reduced, and the companies would operate more efficiently as one entity. As to the customers of Manulife Philippines and MFP, there would be no change as to how their policies and plans are managed and maintained,” Funa said, citing the two companies’ merger plan.
MFP is a wholly owned subsidiary of Manulife Philippines, but the pre-need arm has not sold education nor pension plans since 2012.
Also, MFP does not have any employees of its own, as all its operations and servicing are currently being performed by Manulife Philippines, Funa noted, even as the pre-need firm “continues to be compliant with all corporate, regulatory, and legal requirements in order to maintain its certificate of authority to service its remaining 31,693 existing plans.”
Meanwhile, Funa told the Inquirer on Saturday that since Finance Secretary Benjamin Diokno’s position to push through with the mandatory hike in insurers’ net worth to at least P1.3 billion by year-end had already been made clear, there was no point to discuss it again with the life and non-life insurance groups, which were lobbying to keep the current P900-million threshold.
Funa said he recently discussed with top officials of the Philippine Life Insurance Association (PLIA) as well as the Philippine Insurers and Reinsurers Association (PIRA) a couple of IC initiatives in cooperation with the World Bank, such as the Philippine catastrophe insurance facility (PCIF) and the mandatory own risk and solvency assessment (ORSA) among industry players.
In a circular last week, Funa provided an additional incentive in the annual corporate governance reports of non-life insurers taking part in the PCIF pool.
Funa also advised all life, non-life and reinsurers to adopt an ORSA framework as part of their risk-management systems.
