BDO sells 5% stake in Philam Equitable Life to former owner

MANILA, Philippines -  Banco de Oro Unibank Inc. (BDO) has sold its five-percent stake in the defunct Philam Equitable Life Assurance Co. Inc. (Pelac) to its original owner, Philippine American Life and General Insurance Co. Inc. (Philamlife).

BDO president and chief executive officer Nestor U. Tan said they, however, were barred from disclosing the amount involved due to confidentiality arrangements but it may turn out as a clean profit since BDO did not shell out a separate amount for the live contract between Equitable PCI Bank and Philamlife.

“We did get a fair price for it,” Tan commented on the deal.

Prior to acquiring Equitable PCI Bank, BDO already controlled 40-percent equity in Generali Pilipinas, a joint venture with Assicurazioni Generali of Italy and Jerneh Asia Berhad of Malaysia.

Generali Pilipinas is ranked among the top 10 life insurers in the country with an active bancassurance practice with BDO. “The bank continues to have an exclusive bancassurance agreement with Generali Pilipinas,” BDO said.

The Equitable Bank acquisition included its live contract with Philamlife, thus leaving BDO in a unique situation wherein it had two bancassurance partners. The contract expired in 2009.

However, Philamlife, the country’s leading life insurance firm, acquired in August the same year the now defunct Ayala Life Assurance Corp. of the Ayala Group of Companies and subsequently formed a joint venture company for bancassurance called BPI Philam.

“Philam exercised its option under their agreement to acquire BDO’s five-percent stake in Pelac in line with their mutual agreement to end their bancassurance  partnership. This sale also follows Philam’s signing of an exclusive bancassurance tie-up agreement with BPI in 2009,” the BDO report added.

Bancassurance allows life insurance companies to sell policies through the branch network of a partner bank, which has to be a commercial bank. But the Bangko Sentral ng Pilipinas (BSP) ruled that the bank must own a minimum five-percent equity owner of the life insurer in order to practice what the banking regulator calls cross-selling (bancassurance).

Generally, banks earn fees or commissions from the bancassurance arrangement with an insurer while the insurance partner gets to use the bank’s extensive distribution network.

In 2009, Generali Pilipinas reported total premium income of P3.2 billion, placing it at seventh overall among the 34 industry players.

Premiums earned in 2009 alone reportedly amounted to P2.6 billion, of which majority was produced by the bancassurance distribution network.

BDO earlier reported that its net income in 2010 reached a record P8.8 billion, or 46 percent higher than the P6 billion recorded in 2009. It is also the first commercial bank to report consolidated resources amounting to over P1 trillion.