Yuchengco firms in merger talks

MANILA, Philippines - Great Pacific Life Assurance Corp. (Grepalife) and Great Life Financial Assurance Corp. are in talks over a possible merger, with the former seen as the surviving entity in the process.

Both life insurance companies are under the umbrella of the Yuchengco Group of Companies.

Grepalife acquired one million shares of Great Life recently from Rizal Commercial Banking Corp. (RCBC), the commercial banking unit of the Yuchengco Group.

“The amount of consideration is P211 million in cash for one million shares of Great Life. The selling price per Great Life share of P211,488 represents the audited end-2008 book value of Great Life’s shares, “ RCBC told securities regulators over the weekend.

While RCBC will completely divest in Great Life, it will retain five percent control of Grepalife.

“The transaction will allow RCBC to continue to grow its bancassurance partnership with a more effective and bigger Grepalife since it retains its five percent shareholding in Grepalife,” Elbert M. Zosa, executive vice president and corporate information officer of RCBC, said.

Under Bangko Sentral ng Pilipinas (BSP) regulations on cross-selling, the commercial bank must own at least five percent equity of a company (such as Grepalife) to practice cross-selling or allow Grepalife to sell life insurance policies within the bank’s branch premises or tap into the bank’s client base. It is known in the insurance industry as bancassurance.

“In pursuit of RCBC’s strategic on bancassurance, the transaction will facilitate the merger of Great Life and Grepalife, hence allowing Grepalife to enjoy the benefits of a stronger company, with economies of scale, wider customer base and market reach. As bancassurance partner, the bank will be able to benefit from the improvements,” Zosa added.

In the first three months of 2009, Grepalife reported a 22-percent increase in total premiums to P504.7 million.

Agency sales reported a 54-percent growth in first year premiums from January to March compared with the same period last year.

Grepalife reported a 30-percent growth in premiums in 2008, or from P1.44 billion in 2007 to P1.86 billion. It ranked number eight among the top 10 life insurance companies last year.