By Saeed Azhar and Lawrence White
SINGAPORE/HONG KONG (Reuters) - Singapore's DBS Group Holdings (SI:DBSM) has hired Morgan Stanley (N:MS) to find a partner to sell life insurance products in Asia under a new deal, after its pact with Aviva Plc (L:AV) ends in 2015, people with direct knowledge of the matter said.
Singapore and Hong Kong - two of DBS's strongest markets - are seen as profitable for insurers due to their status as Asia's main wealth management centres and an ageing population.
According to Swiss Re research, Singapore is an under-penetrated market, with per capita life insurance premiums significantly lower than many other developed economies.
The so-called "bancassurance" model - as opposed to the traditional agency model - is lucrative for commercial banks in Asia because global insurers are willing to pay hefty fees for access to lenders' branch networks.
DBS plans to finalise the new arrangement in the first half of next year, the sources said. The people did not want to be identified because DBS's plans are not public.
"If you compare with precedence this deal could be quite valuable for DBS," one of the sources said.
DBS and Morgan Stanley declined to comment.
In similar moves, AIA Group (HK:1299) last year struck a 15-year exclusive deal with Citibank (N:C) in Asia, for which AIA said it paid an $800 million upfront payment.
Prudential Plc (N:PRU) also struck an agreement this year with Standard Chartered (L:STAN), agreeing to pay $1.25 billion in fees, to extend its current agreement for 15 years.
The value of these deals is worth much more than those upfront payments over their 15-year life spans.
MAJOR PLAYERS
The new DBS tie-up is expected to be the last major bancassurance deal by an Asian bank until HSBC (L:HSBA) renews its existing Asia arrangement in 2022. Allianz (DE:ALVG) paid only $100.5 million in upfront fees to HSBC in late 2012 for a 10-year pact.
The DBS deal is likely to attract major insurance companies such as Asia's second-largest insurer by market capitalisation, AIA Group (HK:1299), Canada's No. 1 insurer Manulife (TO:MFC) and Europe's second-biggest insurer, French group AXA (PA:AXAF)
It could also draw in new players such FWD, the insurance firm backed by Hong Kong businessman Richard Li, the youngest son of Asia's richest man Li Ka-shing , banking sources said.
Spokesepeople for AIA, Manulife, FWD and AXA declined to comment.
The new deal could cover DBS's more than 260 branches in Singapore, Hong Kong, Indonesia, Taiwan, China and India.
The incumbent Aviva, which has been a partner with DBS since 2001 and last extended its arrangement with the Singapore bank in 2009, is also expected to bid for the new partnership, the sources said.
Aviva was not immediately available to comment.
(Editing by Stephen Coates)