Citibank, a division of Citigroup, Inc. (C - Analyst Report), has entered into an exclusive deal with AIA Group Limited for distribution of the Asian life insurer’s products through Citibank's retail branch network across the Asia-Pacific region. The deal, better known as bancassurance, is expected to start from Jan 2014 with the establishment of a local territory each in due course.
The partnership arrangement will operate in 11 markets in the Asia-Pacific region covering Hong Kong, Singapore, Thailand, China, Indonesia, Philippines, Vietnam, Malaysia, Australia, India and Korea. Notably, these are the fastest growing life insurance markets in the world, paving the way for both companies to gain from rising premiums.
The deal is valued at more than $4 billion and will run for a period of 15 years. Though the financial terms were not disclosed by the company, as per the deal, insurer AIA group is required to pay an upfront fee amounting more than $1 billion to Citigroup in addition to an annual fee based on the gains from the new business.
Through this partnership arrangement, AIA group got the opportunity to cater to a huge client base of 13 million retail card holders and banking customers across Citibank’s 600 branches in the above mentioned 11 markets. Notably, Citibank has experienced strong growth in its Asian operations over the last few years. This distribution deal will not only serve retail, but also cater to corporate life insurance products through all retail distribution networks including branches, telemarketing and online platforms.
Apart from traditional market agency channel, in some countries, banks are also insurance sellers. Citigroup expanded its footprint in this bancassurance deal that is expected to fetch revenue in the billions of dollars.
Citibank is not the first company to take such a move. Recently, insurers from Europe, the U.S. and Japan began seeking distribution agreements in Southeast Asia that local insurers and banks offer. This led to increased momentum in Asia’s bancassurance industry.
Notably, companies that bid for this multi-billion dollar distribution deal include N.J.-based Prudential Financial, Inc. (PRU - Analyst Report), New York-based MetLife, Inc. (MET - Analyst Report) and Canada-based Manulife Financial Corp. (MFC - Analyst Report).