Non-life insurers Empire, CCC in merger talks

MANILA, Philippines - In a continued shakeup in the local insurance industry, two mid-sized non-life insurance companies are reportedly in advanced merger talks while several others are contemplating merger and acquisition (M&A) or consolidation, sources said.

CCC Insurance Corp. and Empire Insurance Co. are allegedly finalizing their merger deal. Of the country’s 86 non-life insurance firms, Empire Insurance ranked 36th and CCC Insurance was ranked 61st in terms of assets in 2009.

Empire Insurance has a paid-up capital of P125 million while CCC Insurance is still in the P100-million level. Empire Insurance is controlled by the Santos clan, which used to own then Prudential Bank before Bank of the Philippine Islands (BPI) acquired it in 2005.

Based on information gathered, Empire Insurance will be the surviving entity when the merger is consummated. “Empire Insurance has the expertise although with limited marketing facilities while CCC Insurance has the marketing resources but lacking in expertise. It seems to be a good combination,” industry source said.

Government’s firm resolve to implement the much-delayed minimum paid-up capital requirement of P125 million by end-March this year is forcing several non-life insurance companies to initiate merger activities, industry sources told The STAR.

Insurance Commission (IC) head Emmanuel L. Dooc in fact, confirmed that there are ongoing M&A and consolidation activities over the last few weeks.

Dooc said the increasing number of consolidation and M&A reports was a direct result of the implementation of the minimum capitalization requirement which the Department of Finance (DOF) started way back 2008.

“It seems there are many insurance companies especially in the non-life insurance sector that are facing difficulties meeting the March 31 deadline,” he admitted.

The IC has been urging the life and non-life insurance sector to consolidate to prepare the entry of major regional financial institutions in the Philippine market.

About 30 non-life insurance companies are reportedly scrambling to raise additional capital, sources added.

Next year, the minimum paid-up capital will again be raised by another P50 million to P175 million as the regulators continued to ensure the financial health of the country’s insurance industry.

Finance Secretary Cesar Purisima said that regional competition will eventually heat up by 2015 when the Asean Free Trade Agreement (AFTA) will be fully enforced.

Purisima stressed that Asia plays host to some of the world’s highly-capitalized insurance firms that would overrun domestic insurers “not only in terms of capital, but also in terms of expertise and products.”