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BOI, UBI & Dai-ichi tie up for Insurance
Business
New Delhi, December 23, 2006
Bank of India (BOI) and Union Bank of India (Union Bank), two
leading Public Sector Banks head quartered at Mumbai, and the
Dai-ichi Mutual Life Insurance Co. (Dai-ichi Life), a leading
Japanese company in the Life Insurance field have joined hands
for setting up a Joint Venture Life Insurance Company. The
arrangement was formalized with the signing of an MOU among
the three partners at New Delhi on 21st December 2006. Shri
P.Chidambaram, Union Minister for Finance was the Chief Guest
of the function and Shri Pawan Kumar Bansal, Minister of State
for Finance was the Guest of Honour. The function was also
attended by officials from the Reserve Bank of India,
Government, Financial Institutions, Embassy of Japan,
representatives of the media and the press, and a host of
elite customers of the Banks.
The MOU among others, envisages, a capital stake of 51% by BOI,
26% by Dai-ichi and 23% by Union Bank.
On the occasion, Shri M.Balachandran, Chairman and Managing
Director, Bank of India said that this joint venture will add
value to shareholders wealth and provide long term avenue for
income growth to all the three partners.
Shri M.V.Nair, Chairman and Managing Director, Union Bank of
India said that the two Public Sector Banks have entered into
a formal working arrangement to leverage their network
infrastructure and to pool their skill sets to enter this
foray.
Mr. K. Iki, Director and Senior Managing Executive Officer,
Dai-ichi Life said the strength of the two Banks combined with
Dai-ichi’s over 100 years long know-how and domain knowledge
makes it an ideal tripartite partnership.
The insurance venture would generate a steady stream of income
for the three partners after it achieves an economic scale.
Further BOI and Union Bank will also earn sales commission on
the products sold at their branches. This would therefore,
provide a regular income to the Banks and strengthen their
revenue bases on a mid-to-long term basis and help to improve
the non-interest income ratio of the Banks considerably.
Despite the strong past growth, the life insurance penetration
levels in India are still low and many opportunities are left
untapped. It is also estimated that India is the second
largest and fast growing population with a high economic
growth potential and a high savings potential. The growth
opportunities for life insurance business are very high as the
penetration further rises. As per an ASSOCHAM study, the
Indian Insurance business is set to grow to US$60 billion by
2010 from US$10 billion now. Out of this US$20 billion
life-insurance business will accrue from rural and semi-urban
areas, where the two banks have strong presence. The scope for
insurance business in Rural India including Micro-Insurance
shall be tapped by BOI and Union Bank’s rural branch network
and shall be supplemented by branches of Regional Rural Banks
sponsored by the two banks.
Banking and life insurance businesses are increasingly
becoming complimentary to each other. Entry into this sector
would, therefore, promote the Banks as one stop financial
services institutions for the millions of bank customers. Both
banks at present offer Life Insurance products from 3rd party
vendors. The cross selling of insurance products shall be
substantially better when the bank staff have the benefit of
an in-house arm for this purpose, and they shall now sell the
name of their own insurance company. Additionally, the product
innovation in insurance tailored to banks’ requirements shall
help boost the sale of banking products as well.
Dai-ichi Life is a leading player in the world's second
largest life insurance market in Japan. It has a century of
experience in Life Insurance business. It has sound product
knowledge, sharp asset management skills, and strong
operational capabilities to manage Life Insurance business,
which make Dai-ichi Life the best insurance JV partner on the
insurance company side. It ranks one among the top players by
premium written in the global life insurance industry and No.2
in Japanese market with over US$21 billion of capital base.
Its total assets stand at US$276 billion and its incoming
premium is to the tune of US$29 billion.
Bank of India and Union Bank have a strong network of more
than 5000 service outlets which shall provide a sound
distribution channel, which is the key to the success of an
insurance venture. The 40 million banking customers base of
the two banks taken together shall provide much scope of cross
selling of insurance products. The two banks have a strong
brand equity, and command high level of trust of their
customers and people at large. Additionally the Regional Rural
Banks sponsored by the two banks have more than 1400 service
outlets to tap the life-insurance business in the rural areas.
Bank of India has its presence across length and breadth of
India with over 2800 branches / offices. The Bank also has
strong international presence with 24 overseas offices at the
key banking and financial centres in all the time zones of the
globe. The Bank ranks among top Indian Banks with over 24
million customer accounts and a business mix of over Rs.176000
crore. Bank of India has a very long relationship with Japan
going back to 1950 where it has 2 branches at Tokyo and Osaka.
BOI has also been a banker to Japan Bank for International
Cooperation for its Yen Credit and funding of long term
projects in India.
Union Bank has a network of more than 2100 branches and
offices. Union Bank occupies a premier place in Indian Banking
scenario with business mix crossing the figure of Rs.140,000
crore. The customer base of the Bank is over 16 million. Union
Bank is very strong on technology and has networked more than
800 branches under Core banking solution, covering more than
75 % business of the Bank. The Bank has efficient Integrated
treasury for domestic & International business.
The two Banks have over the years expanded their product
offerings and today offer almost all financial products for
both corporate and retail customers. Both the banks also have
a strong technological infrastructure with substantial
business on CBS platform.
BOI and Union Bank have in the recent past announced a few
more initiatives of working together eg., for loan
syndication, cash management services, international
operations and sharing training facilities for mutual
benefits. The idea is to pool the resources and expertise so
as to handle larger projects from the syndication stage for
better business and fee income, as also achieve benefits in
terms of costs and improved delivery.
The Governments of India and Japan have very recently on 15th
December 2006 announced a special economic partnership
initiative meant to promote Japanese investment in India. This
Joint Venture between BOI, Union Bank and Dai-ichi in the
field of life insurance has come at a time when the Government
initiatives also support and encourage such joint ventures.
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