HSBC agrees £581m deal to sell insurance divisions

Stuart Gulliver
Stuart Gulliver
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HSBC has agreed to sell its general insurance businesses to French insurer AXA Group and Australia’s QBE Insurance Group for £581m, it was revealed yesterday.

HSBC is moving ahead with a plan to divest its non-core assets.

Analysts said that HSBC’s decision to exit the business could be the first of similar deals.

Lenders globally are considering selling capital-intensive businesses as reserve requirements become more strict.

The deal, which is the latest in a series of cost-cutting initiatives under new HSBC chief executive Stuart Gulliver, includes 10-year agreements with AXA and QBE.

The agreements will earn commissions and profit-related payments for HSBC on top of the cash value of the deal.

For AXA, the acquisition is a step forward in its effort to boost its emerging markets presence.

AXA’s regional chief financial officer François-Valéry Lecomte told a media conference that the 2015 targets were based on organic growth and this transaction accelerates that.

AXA Asia chief executive Mike Bishop later downplayed any chance the acquisition could help the insurer meet the targets earlier.

Speaking in a conference call with reporters, Mr Bishop called the gains it brought to the entire company “incremental”.

AXA is hoping to double its gross revenues and triple its underlying earnings by 2015 for its general insurance business, under a plan launched last year to boost profits.

AXA is paying $494m for the assets in Hong Kong, Singapore and Mexico, which had a net asset value of $48m at the end of 2011, HSBC said in a stock exchange filing.

AXA will also become the sole provider of general insurance products distributed by HSBC in Hong Kong, mainland China, Singapore, India and Indonesia, and of property and casualty products distributed by HSBC in Mexico.

The distribution agreement does not apply to Hong Kong or mainland China customers of Hang Seng Bank, a unit of HSBC, or HSBC’s Chinese rural banks, or to customers of PT Bank Ekonomi Raharja Tbk in Indonesia.

QBE will pay $420m for the business in Argentina, which had an net asset value of $189m.

QBE, Australia’s biggest insurer by premiums, has completed more than 75 deals in 10 years, expanding its reach to 50 countries.

QBE’s agreement with HSBC gives it the right to be the exclusive provider of general insurance products distributed by HSBC to customers in Argentina and by Hang Seng Bank to customers in Hong Kong and mainland China.

In May, HSBC announced plans to sell non-core businesses, which included shrinking its network of 475 US branches to focus on the international business of US clients and the sale of several European retail banking businesses including those in Poland and Russia.

HSBC has cut 11,000 jobs and sold 19 businesses as part of Mr Gulliver’s plan to cut annual costs by $3.5bn.

Deals already struck will cut $50bn in risk-weighted assets.

The deals are subject to regulatory approvals and are expected to close in the second half of 2012, while the deal in Argentina may close earlier, HSBC said.

The gross asset value of the businesses being sold was $1.23bn at the end of 2011, it added.

AXA will rise to the top insurance ranking in Hong Kong and Mexico and to second place in Singapore following the deal, the company said. QBE said it expects its part of the acquisition to add to its earnings in the first full year.

HSBC was advised by HSBC Global Banking and Markets and co-advised on the sale of its Latin American assets by Goldman Sachs.