MetLife And Manulife Bidding For $10 Billion Asian Opportunity

by Trefis Team
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MetLife (NYSE:MET) and Manulife (NYSE:MFC) are among five insurance companies bidding to form a bancassurance partnership with Citigroup (NYSE:C) in Asia. [1] The bancassurance distribution model, also known as the bank insurance model (BIM), is an arrangement where a bank allows an insurance company to sell products to its client base through the bank’s sales channel. This allows the insurance company to reduce wage expenses while expanding its customer base, as sales are generally handled by bank employees. Citigroup manages over 34 million customer accounts in Asia through 600 branches in 14 markets. Reuters reports that the deal could generate potential revenues of over $10 billion over the next 15 years. [2]

AIA Group, Prudential Plc and FWD Group are the other three insurers involved in the race, the winner of which will make an exclusivity payment of $1.5 to $2 billion to Citigroup. Both MetLife and Manulife have been looking to expand in the Asian markets, and this would move them a long way towards their goal. 

See our full analysis of MetLife

MetLife

MetLife has operations in some of the fastest growing economies in Asia-Pacific including China, Japan, Hong Kong, South Korea and Australia. The company recently entered an agreement with Punjab National Bank (PNB) to expand into the Indian market, and also has operations in the UAE, Nepal, Bangladesh and Pakistan. Asian markets account for more than 60% of MetLife’s international premiums. The company recently reported a 12% year-on-year increase in premiums from the region on a constant currency basis for the third quarter. However, as a result of foreign exchange fluctuations the reported value was down 5%. We expect strong growth for MetLife in Asia-Pacific in the coming years.

Manulife

A third of Manulife’s core earnings (a non-GAAP measure introduced by the company last year which excludes the impact of interest rates, equity markets and other one-time items) come from Asia-Pacific, where the company has established operations in Japan, China, Hong Kong, Thailand, Malaysia, Indonesia, Singapore and the Philippines. Manulife reported a 4% decline in insurance sales in the region for the third quarter, but this was offset by a 21% surge in wealth product sales as the company’s earnings climbed 5%. The company’s premiums from Asia have grown at a CAGR of nearly 30% through the last four years and like MetLife, we believe Manulife is on the right track for expansion in the region.

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Notes:
  1. Insurers vie for lucrative Asian distribution deal with Citi, Seeking Alpha []
  2. UPDATE 1-Metlife, AIA place final bids for Citi bank distribution deal-sources []
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