French and US insurers in running for HSBC sale
HSBC's plan to sell its general insurance business worldwide is close to the final stages, with French insurance giant AXA and US insurer ACE on the short-list of potential buyers, say people familiar with the situation.
HSBC Holdings in September approached a number of insurers, including Allianz, AXA, Zurich and MSIG, to sell its worldwide general insurance business, these sources told the South China Morning Post.
Hit with a deluge of claims following the March 11 earthquake, Japanese insurers are understood to have shown little interest in bidding for the business, leaving US and European insurers as the frontrunners.
'ACE and AXA are bidding most aggressively,' said one insurance executive who requested anonymity.
When it closes, the deal is expected to be worth at least US$1 billion.
HSBC, the biggest lender in Europe and Hong Kong, is also the largest general insurer in the city, with net gross premium of HK$1.85 billion in 2009, representing a market share of 6.5 per cent. It has general insurance operations in Britain, France, Brazil, Singapore and Asian markets, offering policies covering medical, car, travel, property and marine cargo.
'Since ACE and AXA are both insurance companies and HSBC is a bank, the acquisition would provide a big new client base for them,' the insurance executive said. 'HSBC's clients are less price-sensitive and more quality-conscious.'
The executive said ACE has traditionally been strong in products for infrastructure projects and director liability insurance, so they want HSBC's general-insurance client base and products.
ACE, which is also one of the world's largest general insurers and operates in more than 50 countries, has been aggressively expanding through acquisitions. In October 2010, it entered the Hong Kong life insurance market by paying US$425 million for New York Life's Hong Kong and South Korean operations.
AXA, which is Europe's second-biggest insurer and one of the biggest life insurers in Hong Kong, could expand its general insurance arm substantially if it can swing the deal.
HSBC, AXA and ACE declined to comment.
The sale will mark HSBC's withdrawal from the general insurance business but it will still keep the life and pension insurance businesses, which have been more profitable.
Chief executive Stuart Gulliver had said in May that he would sell HSBC's non-core businesses and close the loss-making ventures and branches to cut global expenses by up to US$3.5 billion a year by 2013. HSBC has sold 18 of its businesses in the past year to raise US$48 billion.
The market value of Asia's life-insurance sector fell by this amount in 2008. Source: Boston Consulting Group