UPDATE 1-Manulife, DBS in $1.2 bln insurance deal for Asia

* Manulife expects deal to be accretive to EPS in 2017

* Last major Asia “bancassurance” deal until HSBC renews in 2022

* Existing partner Aviva as well as AIA, Pru competed for deal (Adds detail from official announcement, background)

HONG KONG/SINGAPORE, April 8 (Reuters) - Canadian insurer Manulife Financial Corp is paying $1.2 billion to Singapore’s DBS Group Holdings Ltd for a 15-year partnership that will allow the insurer to sell products through the lender’s Asian branch network.

Manulife will pay the amount upfront to the Singaporean bank, while there will be variable payments based on the success of the partnership, the two companies said in a statement.

Manulife expects the agreement to be accretive to core earnings per share in 2017 and the initial payment is expected to reduce Manulife’s regulatory capital ratio by 10 points.

The deal marks the end of Aviva Plc’s longstanding arrangement with DBS. Both were partners since 2001.

Aviva was among the players competing for the new partnership that also included AIA Group Ltd and Prudential plc.

The so-called bancassurance deal is the last major agreement of this kind available for insurers keen to tap into Asia’s fast-growing insurance market until HSBC considers a new deal in 2022.

The “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.

The agreement signed between DBS and Manulife on Wednesday will take effect on January 1, 2016, covering the lender’s 200 branches in Singapore, Hong Kong, China and Indonesia.

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.

In similar moves, AIA Group struck a 15-year exclusive deal with Citibank in Asia in 2013, for which AIA said it paid an $800 million upfront payment. Prudential plc also struck an agreement last year with Standard Chartered , agreeing to pay $1.25 billion in fees, to extend its current agreement for 15 years.

Reuters reported last October that DBS Group had hired Morgan Stanley to find a partner to sell life insurance products in Asia under a new deal, after its pact with Aviva ends in 2015.

JPMorgan advised Manulife on the deal, sources said. (Editing by Muralikumar Anantharaman)