HSBC sells general insurance business in Hong Kong

AXA will become the exclusive provider of general insurance products to HSBC’s customers in Hong Kong.

HSBC and Hang Seng Bank have agreed to sell their general insurance businesses in Hong Kong, Singapore, Argentina and Mexico (the ‘Sale Territories’), representing further progress in the execution of strategy. The value of the gross assets to be sold by HSBC Group companies was US$1,228m (net asset value US$237m) at 31 December 2011, of which assets to be sold to AXA represent US$444m (net asset value US$48m) and assets to be sold to QBE represent US$784m (net asset value US$189m).

HSBC Insurance (Asia) Limited, HSBC Insurance (Singapore) Pte. Limited and HSBC Seguros, S.A de C.V., Grupo Financiero HSBC, all wholly-owned subsidiaries of HSBC Holdings plc, have entered into agreements to sell their general insurance portfolios in Hong Kong, Singapore and Mexico, respectively, to AXA Group (‘AXA’).

HSBC Argentina Holdings S.A., and HSBC Participaciones (Argentina) S.A., each wholly-owned subsidiaries of HSBC Holdings plc, have entered into an agreement to sell HSBC Argentina Holdings S.A.’s general insurance manufacturing subsidiary, HSBC La Buenos Aires Seguros S.A., to QBE Insurance Group Limited (‘QBE’).
Hang Seng Bank Limited (‘Hang Seng Bank’), a 62% owned subsidiary of HSBC Holdings plc, has entered into an agreement to sell its general insurance manufacturing subsidiary, Hang Seng General Insurance (Hong Kong) Company Limited, to QBE.

Following completion of relevant sales, new 10 year bancassurance agreements entered into by the HSBC Group companies listed below2 and by Hang Seng Bank will become effective. AXA and QBE will become the exclusive providers of, and underwrite, general insurance products distributed by HSBC Group companies and Hang Seng Bank to retail banking and commercial banking customers in Hong Kong and Mainland China, Singapore, India, Indonesia, Mexico and Argentina (‘the Distribution Territories’) as described below.

AXA will become the exclusive provider of general insurance products distributed by HSBC Group companies to customers in Hong Kong and Mainland China (other than customers of Hang Seng Bank and HSBC’s Chinese Rural Banks), Singapore, India and Indonesia (other than customers of PT Bank Ekonomi Raharja Tbk) and of property and casualty products distributed by HSBC Group companies to customers in Mexico.

Under similar arrangements, QBE will become the exclusive provider of general insurance products distributed by HSBC Group companies to customers in Argentina and by Hang Seng Bank to customers in Hong Kong and Mainland China.

Stuart Gulliver, HSBC Group Chief Executive, said: “This is a further step in the execution of our strategy. It will enable us to focus our capital and resources on the growth of our core businesses, including the building of our broader wealth management capabilities.”

“These long term collaborations with AXA and QBE will broaden and strengthen the suite of general insurance products available to our retail banking and commercial banking customers in Hong Kong, Mainland China, Singapore, India, Indonesia, Mexico and Argentina.”

The aggregate cash consideration payable by AXA and QBE for the acquisitions of the general insurance businesses in the Sale Territories, based on net asset values1 as at 31 December 2011, and the opportunity under the bancassurance agreements to be the providers of general insurance products distributed by HSBC Group companies and Hang Seng Bank to customers in the Distribution Territories, is approximately US$914m (US$494m by AXA and US$420m by QBE.

Under the 10 year bancassurance arrangements AXA and QBE will pay commissions on product sales and may make profit-related payments, to HSBC Group companies and Hang Seng Bank.

The transactions, which are subject to regulatory approvals, are expected to complete during the second half of 2012, although the transaction in Argentina may complete earlier.

HSBC was advised on all aspects of the transaction by HSBC Global Banking and Markets and was co-advised on the Latin American aspects of the transaction by Goldman Sachs.