Manulife inks $1.2B deal with DBS Bank

Canadian life insurance giant aims to bolster foothold in Asia through new agreement

Canada’s largest life insurance company will pay at least $1.2 billion (U.S.) in a 15-year commercial agreement with DBS Bank, which will use its branch network in Singapore, Hong Kong and two other Asian markets to sell Manulife products.

Manulife Financial Corp. says the agreement will enable it to use a distribution network with about 200 bank branch offices in Singapore, Hong Kong, China and Indonesia, starting Jan. 1, 2016.

The Canadian company, which operates in several countries — including as John Hancock in the United States — says it will pay the initial amount in cash from its internal resources, and expects a boost to its core earnings in 2017.

CIBC World Markets analyst Robert Sedran says the DBS agreement will “add significantly” to Manulife’s insurance sales in Asia starting from the first year and make Singapore the third-largest market in Asia for Manulife.

“DBS has the highest number of bank branches in Singapore and Hong Kong along with an extensive branch network across the rest of Asia,” Sedran wrote in a note to clients. “It has approximately six million customers in the four markets covered by this agreement.”

He said there’s too little information to calculate Manulife’s internal rate of return for the investment, but predicted it would be low. On the other hand, he said, its use of existing resources gives Manulife a dedicated distribution channel and bigger scale.

“As such, we view the transaction as an incremental positive to what was already a constructive investment thesis,” Sedran wrote.

Barclays analyst John Aiken said the deal is also positive for Manulife because it affirms Manulife’s position “as a significant competitor and desirable partner, as this was a well sought-after partnership.”

In total, Singapore-based DBS has 250 branches in 17 markets in the region.