HSBC seeks to sell general insurance unit
HSBC Holdings is approaching a number of European and Japanese insurers in an attempt to sell its worldwide general insurance business, according to people familiar with the situation.
Companies being approached included British insurer Prudential, medical insurance provider Bupa, Allianz, AXA and Zurich, the people said. Japanese insurer MSIG was said to be interested in a deal.
HSBC and the insurers all declined to comment on a possible deal.
The bank, which is the largest general insurance provider in Hong Kong, also has general insurance operations in Britain, France, Brazil and Singapore. It offers a range of general insurance products including policies covering medical, car, travel, property damage and marine cargo.
In Hong Kong, its general insurance business netted gross premiums of HK$1.85 billion in 2009, representing a market share of 6.5 per cent.
Industry sources said the lender had started to approach a number of insurance companies offering to sell its entire general insurance portfolio for about US$1 billion. It has no plans to sell its life and pension business, which is more profitable.
'The insurers being approached are all big players without a banking background,' said an executive at one of the insurers approached. 'Obviously, HSBC would not like to sell the portfolio to banking rivals.'
Another insurance executive said that by selling the general insurance operation to insurers instead of a bank, HSBC would find it easier to negotiate a deal with the buyer allowing it to use its banking network to sell the insurance products and earn commissions.
Another source said the general insurance business was being jettisoned as part of the bank's restructuring plan.
At HSBC's investor strategy day in London in May, chief executive Stuart Gulliver said he would sell non-core businesses as well as close loss-making businesses and branches in order to cut global expenses by US$2.5 billion to US$3.5 billion annually by 2013.
Gulliver also said the group's insurance business would focus on 'life, pension and investment'.
The sale of its general insurance business worldwide came after HSBC said this month it would cut 3,000 staff in Hong Kong, about 10 per cent of its workforce in the city, over the next three years. This followed an announcement last month that 30,000 of its 296,000 employees worldwide would be laid off by 2013.
The lender wants to keep the life and pension business as part of its wealth management sector to cater to its millions of retail banking clients. In comparison, the general insurance does not have a high cross sales value, while the competition is also very fierce. This means the business is not as profitable as life and pension business.
Chan Kin-por, the legislator representing the insurance sector, said the general insurance business had thinner profit margins than the life business, but he did not believe many insurers would leave the market.
'Although the profit margin is thin, the general insurance sector can still make money, provide that they have proper pricing and do not have large claims due to natural disasters,' Chan said.
The gross insurance premium income, in US dollars, HSBC Holdings recorded last year