HSBC disposes insurance under divestment plan
00:44 UTC+8 March 8, 2012
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HSBC has agreed to sell its general insurance businesses to French insurer AXA Group and Australia's QBE Insurance Group for US$914 million in cash, as Europe's biggest bank moves ahead with its plan to divest non-core assets.
HSBC's decision to exit the business could be a precursor to similar deals as lenders globally consider selling capital- intensive businesses as reserve requirements become more strict.
"We expect rising capitalization requirements across the banking and insurance sectors to continue to drive portfolio re-balancing, with some banks in particular reflecting on the value of manufacturing and/ or distributing non-life insurance going forward," said Ron Kozlowski, director of Towers Watson's general insurance consulting business in Asia- Pacific.
The deal, the latest in a series of cost-cutting initiatives under new HSBC CEO Stuart Gulliver, includes 10-year bancassurance agreements with AXA and QBE.
The agreements will earn commissions and profit-related payments for HSBC on top of the cash value of the deal. For AXA, the acquisition is a step forward in its effort to boost emerging markets presence and potentially help Europe's No. 2 insurer to achieve its 2015 targets ahead of time.
AXA's regional Chief Financial Officer Fran?ois-Valéry Lecomte told a media conference that the 2015 targets were based on organic growth and this transaction accelerates that.
AXA Asia Chief Executive Mike Bishop later downplayed any chance the acquisition could help the insurer meet the targets earlier. Speaking in a conference call with reporters, Bishop called the gains it brought to the entire company "incremental."
AXA is hoping to double its gross revenues and triple its underlying earnings by 2015 for its general insurance business, under a plan launched last year to boost profits.
AXA is paying US$494 million for the assets in Hong Kong, Singapore and Mexico, which had a net asset value of US$48 million at the end of 2011, according to HSBC in a stock exchange filing.
AXA will also become the sole provider of general insurance products distributed by HSBC in Hong Kong, Chinese mainland, Singapore, India and Indonesia, and of property and casualty products distributed by HSBC in Mexico.
HSBC's decision to exit the business could be a precursor to similar deals as lenders globally consider selling capital- intensive businesses as reserve requirements become more strict.
"We expect rising capitalization requirements across the banking and insurance sectors to continue to drive portfolio re-balancing, with some banks in particular reflecting on the value of manufacturing and/ or distributing non-life insurance going forward," said Ron Kozlowski, director of Towers Watson's general insurance consulting business in Asia- Pacific.
The deal, the latest in a series of cost-cutting initiatives under new HSBC CEO Stuart Gulliver, includes 10-year bancassurance agreements with AXA and QBE.
The agreements will earn commissions and profit-related payments for HSBC on top of the cash value of the deal. For AXA, the acquisition is a step forward in its effort to boost emerging markets presence and potentially help Europe's No. 2 insurer to achieve its 2015 targets ahead of time.
AXA's regional Chief Financial Officer Fran?ois-Valéry Lecomte told a media conference that the 2015 targets were based on organic growth and this transaction accelerates that.
AXA Asia Chief Executive Mike Bishop later downplayed any chance the acquisition could help the insurer meet the targets earlier. Speaking in a conference call with reporters, Bishop called the gains it brought to the entire company "incremental."
AXA is hoping to double its gross revenues and triple its underlying earnings by 2015 for its general insurance business, under a plan launched last year to boost profits.
AXA is paying US$494 million for the assets in Hong Kong, Singapore and Mexico, which had a net asset value of US$48 million at the end of 2011, according to HSBC in a stock exchange filing.
AXA will also become the sole provider of general insurance products distributed by HSBC in Hong Kong, Chinese mainland, Singapore, India and Indonesia, and of property and casualty products distributed by HSBC in Mexico.
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