HSBC Holdings, Europe’s largest bank by market value, agreed to sell some of its general insurance units in Asia and Latin America for about $914 million, as it focuses on more profitable businesses.
AXA SA would pay about $494 million to acquire HSBC’s general insurance business in Hong Kong, Singapore and Mexico, the London-based bank said in a stock exchange filing. QBE Insurance Group Ltd would pay about $420 million for HSBC’s general insurance business in Argentina and the general insurance unit of Hang Seng Bank Ltd, a 62 per cent owned subsidiary of HSBC, it said.
Including today’s agreement, chief executive officer Stuart Gulliver has announced almost $6 billion of asset sales since May, as the bank sheds jobs and redeploys capital in faster-growing markets. In January, HSBC, which earns most of its profit from Asia, had agreed to sell operations in Costa Rica, El Salvador and Honduras to focus on bigger markets in Latin America.
“Motor vehicle insurance, which is a major element of HSBC’s general insurance business, has low margins and volatile profitability," Dominic Chan, an analyst at BNP Paribas in Hong Kong, said today.
“The business isn't in line with HSBC's strategy of seeking to tap high-net worth clients.” HSBC shares fell 1.5 per cent to HK$67.80 in Hong Kong trading as of 11:35 am. The city's benchmark Hang Seng Index declined 0.6 per cent.
10-year agreement
The sales are subject to regulatory approvals and are expected to close in the second half of this year, according to the statement. HSBC will enter 10-year agreements with Paris- based AXA and Sydney-based QBE to offer general insurance products to HSBC and Hang Seng Bank customers when the transaction is complete. The assets being sold had a combined net asset value of $237 million as on December 31, HSBC said in today’s filing.
“The deal gives AXA access to regional distribution through HSBC branches in markets where these are trying to build presence,” said Arjan van Veen, Credit Suisse Group AG’s Hong Kong-based insurance analyst. “Currently, there are only a handful of countries in Asia where these have scale” and the purchases are “strategically sensible” for both AXA and QBE, he said.
HSBC is among many European banks selling assets, as lenders brace for stricter global capital rules and an economic slowdown. This has provided an opening for insurers like AXA to hasten expansion in Asia, where growth is outpacing that in Europe and the US.
Last year, HSBC posted $993 million of net written insurance premiums for its non-life business, down from $1.02 billion in 2010, according to its 2011 annual report. Net premiums in Asia accounted for about 35 per cent of the total, while Latin America accounted for 52 per cent, the report showed.
