CIMB Sompo Tie-Up

CIMB Group Holdings Bhd will reap a revenue of RM1bil in the first five years of its 15-year tie-up with one of Japan’s largest bancassurance insurers, Sompo Japan Nipponkoa Holdings Inc.

Group chief executive Tengku Datuk Seri Zafrul Aziz said beyond the initial five years, the bank would share the “economic upside” of the partnership besides obtaining the regular commissions generated from the joint business. For the first five years, the uplift (revenue) to us is RM1bil ... Sompo will manufacture and use our branches to sell exclusively.

The revenue, which includes fees for the distribution network as well as sales, will start to be reflected in CIMB’s financial year ending Dec 31, 2017 results. Under the 15-year profit-sharing deal sealed early this month, CIMB will sell and distribute Sompo’s non-life insurance products across the markets of Malaysia, Indonesia, Thailand and Singapore. The banking group has more than 1,000 retail branches across the region.

While Sompo has a partnership with Berjaya Group Bhd to offer general insurance in Malaysia, the tie-up with CIMB was at the Sompo group level. CIMB is the first bank in the region to do this kind of partnership, where we try to sell non-life insurance in four countries at one go.

CIMB has started selling in Singapore already and will start in Indonesia by the end of the year. In Malaysia, it currently has an agreement with Allianz Malaysia Bhd that expires in 2017 after which CIMB will distribute Sompo products, while in Thailand the banking group will start selling Sompo in 2018. 

The income upside from the partnership comes with no incremental capital needs or charge and is in line with CIMB’s Target 2018 or T18 strategy, where the focus is on enhancing profitability whilst being conscious of capital deployment. 

CIMB has also boosted its capital base through its recent Sun Life Financial Inc deal, whereby it has agreed to sell its 51% stake in the Indonesian life-insurance venture for RM169mil. The bank will reap some RM140mil in net proceeds from this deal alone, allowing the country’s second-largest bank by asset size to bring forward its common equity Tier-1 or CET1 capital ratio target of 11% to this year instead of 2018.

Sompo, which has total assets of US$89.7bil and net written premiums of US$22.5bil, has identified bancassurance as one of its primary sales channels in the region. It was previously reported that besides Sompo, Munich-based Allianz SE and France’s Axa SA had also made bids for the bancassurance agreement.