Bancassurance: Overpriced Fad or Here to Stay? 13 January 2017

Transcription

1 Morgan Stanley Presentation_vSENT.ppt\12 JAN 2017\4:22 PM\1 : Overpriced Fad or Here to Stay? 13 January 2017

2 Morgan Stanley Presentation_vSENT.ppt\12 JAN 2017\4:22 PM\2 has Been an Active Theme Across Asia 2

3 Morgan Stanley Presentation_vSENT.ppt\12 JAN 2017\4:22 PM\3 a Key Driver of Growth Across Markets Across key markets in Southeast Asia and more broadly in Asia, insurers have increasingly relied on bancassurance partnerships to grow their businesses Speedy, effective means of acquiring significant scale Indonesia % (1) 60.0% (3) Increased confidence in ability to eecute and create value Increasing challenges in growing agency force amidst a scarcity of talent Singapore (1) 27.0% 36.0% Willing to pay significant premium for access to a high quality retail customer base via large nationwide networks Thailand (1) 40.9% 49.8% India (2) 24.9% 43.6% LIAS, TLAA, IRDA, Broker Research, News Run Notes 1. Breakdown by APE 2. Breakdown by individual new business, March year end; private life insurers only (ecludes LIC) 3. Breakdown by contribution 3

4 Increasing Value Ascribed to (cont d) -Linked M&A Transactions Command a Premium Valuation (1) Precedent M&A transactions involving a bancassurance component (especially a longterm, eclusive relationship) command a valuation premium Premium has become even more evident in the spate of Southeast Asia transactions over the past few years Price / Earnings Price / Embedded Value Deals with 0.0 Deals with Company Announcements, Financials, Regulatory Filings, News Runs Company Announcements, Financials, Regulatory Filings, News Runs Growing Proportion of Transactions % of Total Insurance-related Deal Value (1) Price / Book Value Price / GPW 50% 40% 30% 20% 10% 0% 43% 46% 36% 33% Deals with Deals with 1.2 Company Announcements Company Announcements, Financials, Regulatory Filings, News Runs Company Announcements, Financials, Regulatory Filings, News Runs Note 1. Insurance M&A and pure bancassurance transactions with an Asian target. Echange rate as of the transaction date of announcement 4

5 Morgan Stanley Presentation_vSENT.ppt\12 JAN 2017\4:22 PM\5 Top Life Insurers in Asia Have a Strong Focus on All the top life insurers have formed eclusive bancassurance partnerships in the various markets they operate in, which has supported their strong growth in the region Major Asia E-Japan Life Insurers Total Premiums (1) (2) US$ Bn (3) AIA Prudential (UK) Life Insurance Partners Across Asia In addition to single-market agreements, the top 4 insurers have also formed regional partnerships AIA with Citi Allianz with HSBC Great Eastern with OCBC Prudential U.K. with UOB and Standard Chartered Great Eastern Allianz HSBC Manulife AXA Ageas Cardif (4) Indonesia accounts for ~30-60% of volumes for the top insurers MetLife Zurich Sun Life Aviva Cigna MSIG Tokio Marine News Run, Company Information, Company Financials Eclusive Partners Notes 1. Includes are China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand 2. As of 2013, ecept for Indonesia (2012) and Malaysia (2011) 3. Converted to US$ using mid-year echange rates 4. Bank of Ayudhya partners eclusively with Ayudhya Allianz and Thai Life in Bangkok and upcountry branches respectively 5

6 Morgan Stanley Presentation_vSENT.ppt\12 JAN 2017\4:22 PM\6 Why are Banks Divesting their Insurance Subsidiaries? Over the past several years, a number of banks across the region have been divesting their insurance subsidiaries and moving to distribution-only partnerships Recognition that insurers can create more value from the same platform (and hence share a larger amount) Significant realization of value upfront Substantial, growing stream of capital-light fee income Insurers better placed to manage this business more effectively Increasingly punitive Basel III capital deductions for insurance subsidiaries Recent Divestitures Date Acquirer Seller Size Jan 2010 Sep 2012 Oct 2012 Nov 2012 Jan 2013 Dec 2013 Oct 2015 Prudential UOB Life US$355MM Seller Rationale partnership Aviva NDB US$50MM refocus AIA Prudential ING Malaysia Thanachart Life Sun Life / Khazanah CIMB-Aviva US$1,730MM refocus US$568MM US$594MM MetLife AmBank US$248MM US$1.7Bn (80% stake) partnership refocus Partnership partnership Potential Upcoming Divestitures (1) Westpac Life Insurance Services Bank Market Cap: 15.3 Bank Book Value: 9.1 (2) Thailand FY14 Insurer GPW: (2) Insurer Book Value: 0.6 (2) Bank Market Cap: 30.3 Singapore Bank Book Value: 23.6 (3) FY14 Insurer GPW: 6.2 (3) Insurer Book Value: 4.5 (3) Bank Market Cap: Australia Bank Book Value: 41.3 (4) Bank Market Cap: 77.9 Bank Book Value: 37.7 (5) Investment a drag on capital especially when insurer s BV eceeds 10% of the bank s Tier 1 Capital Investment in Great Eastern increasingly punitive: phasing into full deduction against CET1 Australia s Basel III rules even more punitive than global standard Recently released study concludes that banks could need to increase capital ratios by 200 bps to match top quartile international peers APRA s new conglomerate standards limit ability of banks to utilize non-recourse debt at the subsidiary level to reduce the size of the investment in the subsidiary News Run, Company Financials Company Financials, Capital IQ Notes 1. Operating metrics as of March 2015 in US$Bn unless otherwise specified 2. Echange rate of 1.42 SGD/USD as of 30 September Echange rate of 1.30 AUD/USD as of 30 June Echange rate of 1.37 AUD/USD as of 30 September