Buyers keen to pick out the best in HSBC sale
HSBC may sell its general insurance operations in separate segments rather than as a single deal as final bidders French insurer AXA and US insurer ACE bargain to 'cherry pick' assets, according to sources familiar with the situation.
One source told the South China Morning Post that while HSBC would prefer to sell its global general insurance to a single buyer for more than US$1 billion, the final bidders were bargaining to buy assets in the regions where they had an interest.
'From the buyers' point of view, there is no value in markets which are not very profitable or are a difficult fit with their own business strategy. As such, they are now bargaining to take only parts of the general insurance operation instead of buying the lot,'' the source said.
Another insurance executive who did not want to be named said both AXA and ACE were on a final short list of bidders, and it was understood Hong Kong and Singapore were their most sought-after areas, as these two markets were the most profitable and had good growth prospects.
'HSBC is Hong Kong's largest general insurer and it is also big in Singapore,'' the executive said.
HSBC, AXA and ACE declined to comment yesterday.
In September HSBC approached a number of insurers, including Allianz, AXA, Zurich and MSIG, with an offer to sell its worldwide general insurance business. Sources told the SCMP that AXA and ACE were the most aggressive bidders. ACE is one of the world's largest general insurers, while AXA is Europe's second-biggest insurer and one of the biggest life insurers in Hong Kong.
HSBC, the biggest lender in Europe and Hong Kong, has a 6.5 per cent share of the city's general insurance market and net gross premium income of HK$1.85 billion in 2009. It has general insurance operations in Britain, France, Brazil, Singapore, and other Asian markets, offering medical, car, travel, property and marine cargo insurance.
The sale is part of a plan by HSBC chief executive Stuart Gulliver to sell non-core business to boost profit and cut global expenses.
HSBC will keep its life insurance and pension business which are more profitable.
Louis Tse Ming-kwong, director of VC Brokerage, said HSBC might charge buyers a higher price if they only wanted to buy selected assets.
'It is natural for bidders to want to cherry pick, but if the best assets are sold, HSBC will find it harder to sell the non-profitable ones. HSBC is likely to bargain to sell the business as a whole lot if possible,'' Tse said.
The number of countries in which ACE operates. It has been expanding through buying companies, including those in Hong Kong