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DBS, Manulife tie-up takes aim at Asia’s growing insurance market

"While Asia's middle class is increasing, it is also rapidly ageing, with citizens aged above 60 years old expected to triple to 1.3 billion by 2050. This is a tremendous opportunity in a business that we have strong advantage in," Mr Richard Vargo, regional head of bancassurance at DBS Bank says.  

SINGAPORE: The official launch of a 15-year regional distribution deal between Singapore’s DBS Bank and Canadian insurer Manulife Financial Asia on Tuesday (Jan 5) marks the latest move by companies aiming to gain access into one of the world’s fastest-growing life-insurance markets.

Mr Richard Vargo, regional head of bancassurance at DBS Bank, said at the press conference on Tuesday: “The middle class in this part of the world will expand by more than three times to 1.8 billion by 2020.”

Despite this explosive growth, Asia remains largely under-insured, Mr Vargo added. 

"While Asia's middle class is increasing, it is also rapidly ageing, with citizens aged above 60 years old expected to triple to 1.3 billion by 2050. This is a tremendous opportunity in a business that we have strong advantage in,” he said.  

Manulife's chief financial officer Steve Roder agreed, noting that "Asia is fundamentally important" to the Canadian life insurer. 

"The deal is expected to add materially to insurance sales in Asia from the first year and improve the bank's insurance position especially in Singapore," said Mr Roder, adding that the agreement could catapult Singapore into Manulife's third leading market in Asia, behind Hong Kong and Japan. 

Manulife also expects the partnership to help boost core earnings per share in 2017.

The access to DBS' large and growing retail, wealth and small and medium enterprise (SME) customer base of six million will help Manulife to "deepen and diversify its distribution, while increasing scale and capabilities", added Mr Roder.

S$100M PLUNGE INTO DIGITAL TECH

Both companies also announced plans to make "mutual long-term commitments and investments", such as co-funding up to S$100 million over the next 15 years into digital technology and innovation enhancements plans. 

Manulife noted the emphasis on digital enhancements is in line with the changes of how consumers now access banking services. Mobile banking platforms, for instance, are particularly popular in China.

"We want to take bank insurance to the next level in Asia and be the most advanced bank insurance platform in the region," Mr Roder said. 

DBS Group Head of Consumer Banking and Wealth Management Tan Su Shan agreed, noting that there is also a shift from Internet to mobile among consumers in Singapore and that it is "imperative to ensure that the digital journey is seamless". 

According to a joint filing to the Singapore Exchange in April 2015, Manulife will pay DBS an initial payment of US$1.2 billion, as well as additional variable payments based on the success of the bancassurance partnership. The bancassurance model refers to insurance products distributed through a bank's branch network rather than through individual insurance agents. 

Manulife is taking over UK insurer Aviva, which was the primary distributor of insurance products via DBS' Asian branch network since 2001. 

Global insurers keen to tap into one of the world's fastest-growing life insurance markets have been courting Asian lenders over the years, offering attractive prices for multi-year exclusive access to the banks' branch networks across the region. 

Prudential last year renewed a 15-year distribution agreement with Standard Chartered. This came on the back of AIA Group inking a 15-year exclusive deal with Citibank to distribute its insurance products via the lender's Asia-Pacific retail branch network in 2013. 

The billion-dollar tie-up between DBS and Manulife is reportedly the last major agreement of its kind until HSBC considers a new deal in 2022, according to Reuters.  

PLANING FOR RETIREMENT

According to a joint study on retirement wellness by DBS and Manulife, about two in five people in Singapore feel they are unprepared for retirement, with a lack of savings being the main reason.

The release of the study comes as DBS and Manulife marked the start of their 15-year regional bancassurance partnership on Tuesday.

The study measured retirement preparedness in three key areas - wealth, health and social aspects. Singapore scored 46 out of 100 points, below the regional average of 56, but just ahead of Hong Kong, which was one of the other five economies covered in the study.

The other economies surveyed were India, China, Indonesia and Taiwan.

For Singapore, a total of 1,008 Singaporeans and Permanent Residents between the ages of 40 and 60 took part in the research, which was conducted online by Nielsen in November 2015.

Singapore fared poorly in the wealth category, with about one-third of respondents saying they have enough savings for a comfortable retirement, and 30 per cent saying they will probably need to downgrade after retirement.

DBS said Singapore's low score in the wealth category is partly due to higher expectations. 

Mr Vargo said: "It's realistic about the great lifestyle we have, the high standard of living we have in Singapore, and an increasing realisation of Singaporeans that they really do need to plan, and plan effectively, to be able to maintain that lifestyle for quite a long period of time.

“That means you have to put more money away in your early years to be able to afford 20 to 25 years, realistically, during your retirement years."