MANILA, Philippines - The Rizal Commercial and Banking Corp. (RCBC) and the MICO Equities Inc. undertook a share swap deal recently that would open the floodgates for the sale of non-life insurance policies through the bank’s 319-branch network nationwide.
Under the deal, RCBC will buy 5.64 percent equity of MICO Equities. Under the regulations of the Bangko Sentral ng Pilipinas (BSP), commercial banks can allow its subsidiaries or partners (like insurance companies) to sell its products within the bank’s branch network and client base.
The process is known as cross-selling within the banking sector, and bancassurance in the insurance sector.
Specifically, RCBC will issue 41,993,389 common shares worth P15.20 per share to MICO Equities. In exchange, MICO Equities will issue 169,059 shares at P3,775.60 per share to RCBC. In both cases, the absolutely value are P638.3 million.
MICO Equities is the holding company of the Malayan Insurance Co., the leading non-life insurance company in the country. RCBC and MICO Equities are members of the Yuchengco Group of Companies.
RCBC has been practicing bancassurance or cross-selling with the Great Pacific Life Insurance (Grepalife), the life insurance firm of the Yuchengco group.
Grepalife has at least one financial advisor stationed in most of RCBC branches in Metro Manila and key cities outside Manila. Its target is to have an average one for every branch.
Malayan Insurance will put up its own financial advisors group that will likewise be stationed in RCBC branches.
Banks earn from fees and commissions in the practice of bancassurance albeit a relatively small contributor to institution’s bottomline. Insurers, in turn, add another distribution network to its tools through bancassurance.
The BSP allows the practice of bancassurance or cross-selling as long as the commercial bank owns at least five percent equity in the subsidiary, such as an insurance firm.
After getting clearance from the BSP, it must also inform the monetary authorities of the type of bancassurance products to be sold.
RCBC is not the first commercial bank to practice bancassurance. The leaders in this area are the Bank of the Philippine Islands (BPI), the Metropolitan Bank & Trust Co. (Metrobank), and Banco de Oro Unibank Inc. — TPT