HSBC sells insurance arm for US$914m
HSBC Holdings yesterday sold its profit-making general insurance business in Asia and Latin America to French insurer AXA and Australian insurance group QBE to net US$914 million, marking the latest deal in its sale of non-core businesses.
Stuart Harrison, chief executive of AXA Hong Kong, said there would be no job or salary cuts as the company took HSBC staff on board.
'All general insurance staff in HSBC will become part of AXA,' he said. AXA financed the US$494 million deal internally.
QBE acquired HSBC's general business in Argentina and the general insurance unit of Hang Seng Bank, a subsidiary of HSBC, for US$420 million. HSBC declined to reveal the exact number of general insurance staff to be transferred to AXA or provide figures on cost savings.
The transactions were expected to close in the second half of the year as they waited for regulatory approvals.
HSBC will enter 10-year agreements with both of the insurers, which will allow AXA to become the exclusive provider of general insurance products to HSBC's customers in Hong Kong, Singapore, China, India and Indonesia, and QBE to offer general insurance products to HSBC customers in Argentina, and Hang Seng Bank customers in Hong Kong and the mainland.
The net value of the assets to be sold by HSBC Group were US$237 million as of December 31, 2011, HSBC said. Of the assets to be sold, AXA's portion represented US$48 million, and the assets to be sold to QBE represented US$189 million.
The acquisition will make AXA the largest general insurance provider in Hong Kong, said Francois-Valery Lecomte, chief financial officer of AXA Asia. He said it would enable AXA to overshoot its target to become the largest provider of general insurance in Asia and one of the region's top three life insurers by 2015.
Arjan van Veen, Credit Suisse head of Asia insurance research, said HSBC might go on to sell its life insurance business in Asia, which was the major revenue driver of its insurance unit. Both the general insurance and life insurance business units were profit-generating for HSBC.
This would attract suitors from all over the world, he said, except from the mainland where insurers had a less ample balance sheet. China Life Insurance issued a profit warning for 2011 on Tuesday. The biggest insurer in China said its net profit might fall by 40 to 50 per cent from 33.6 billion yuan in 2010 due to declining investment return caused by market fluctuations.
Stuart Gulliver, chief executive officer of HSBC group, has now sold 19 business units. He announced in May that he would sell HSBC's non-core businesses and shut down loss-making ventures and branches to cut global expenses by up to US$3.5 billion by 2013.
HSBC shares dropped 1.5 per cent to close at HK$67.8 yesterday.