Initial reports indicate that Manulife will control majority of the joint venture, with China Bank taking a minority stake.
The joint venture is similar to the Philam Equitable Life Assurance Co. (Pelac), which is a company formed between the Philippine American Life and General Insurance Corp. (Philamlife) and the then Equitable PCI Bank (EPCIB).
Pelac is now recognized as a separate insurance company ranked among the 20 leading life insurers in 2005. Premiums generated by Pelac are siphoned to mother unit Philamlife, the recognized leader in the country’s life insurance industry.
The new joint venture between Manulife and China Bank is expected to put pressure on other bancassurance ventures in the life insurance business.
Pelac was formed under the wings of then Pelac chief executive Carl Gustini, who is presently the president of Manulife Financials Philippines.
As of October last year, China Bank reported the highest capital adequacy ratio (CAR) of 31.16 percent among commercial banks. Total resources reached P145.49 billion, while total capital funds hit P22.07 billion.
After nine months into 2006, net income amounted to P2.52. Profits for the whole of 2005 reached a record P3.04 billion.
Other than joint ventures between banks and life insurance companies, the practice of bancassurance can also be directly practiced if a commercial bank acquires at least five percent of the insurer, as required by the Bangko Sentral ng Pilipinas (BSP).
The BSP classified the practice as cross-selling, or allowing the subsidiary of a bank to sell its products to the bank’s client base or within the branch premises.
Examples of such businesses are: PhilAxa Life Assurance Corp. or the strategic alliance between Metropolitan Bank and Trust Co. (Metrobank) and Axa Life of France; Bank of the Philippine Islands (BPI) and Ayala Life Assurance Corp.; and Banco de Oro Universal Bank (BDO) and Generali Pilipinas Life Assurance Co., a subsidiary of Generali Assicurazioni of Italy.
In the case of Rizal Commercial Banking Corp. (RCBC), it has two bancassurance partners in the Great Pacific Life Assurance Corp. (Grepalife) and Nippon Life Insurance Co. of the Philippines.