Top insurers bid for HSBC unit
Hong Kong, October 15, 2011
European insurers AXA, Assicurazioni Generali, Japan's Tokio Marine and MS&AD Insurance Group are among suitors to submit first round bids for HSBC's non-life insurance business in a deal worth about $1 billion, sources said.
Allianz SE and Zurich Financial Services AG were also interested in the process, sources previously told Reuters, but it could not be independently ascertained whether they had submitted preliminary bids, which were due on Wednesday.
HSBC, under new chief executive Stuart Gulliver, is exiting non-core businesses and targeting about $3.5 billion in cost savings. The sale of the non-life insurance business is part of that plan. The company has already sold its non-life business in Britain.
HSBC's planned sale is the first major banncassurance deal attempted in Asia and the valuation of this transaction will set a benchmark for other similar deals.
A big question in such deals is determining how much value to pay upfront and how should be built into the banncasurance agreement, which allows the buyer and seller to share future commissions earned from the sale of insurance products.
In some cases, buyers agree to pay a lower upfront value and agree to a rich distribution agreement, which offers incentives for the vendor to perform.
HSBC, Europe's biggest bank, may consider selling the businesses by splitting it by region, sources familiar with the matter said.
HSBC has non-life insurance operations in Hong Kong, Singapore in some Latin American countries and France. Non-life insurance premiums totalled $1.3 billion in 2010, according to HSBC's balance sheet.
AXA, Generali, Zurich, Tokio Marine, MS&AD, Allianz all declined to comment. HSBC also declined comment.
The sources declined to be identified as the sale process was not public.
Potential suitors are attracted to HSBC's captive customer base and the distribution network available through its bank branches.
But there were questions about the ability of potential buyers to bid aggressively because of sharp falls in asset prices globally and the capital issues faced by European financial institutions, sources said.
The geographical spread of the assets also makes the auction potentially tricky as some potential suitors only want certain parts of the business and not the whole.
For instance, the two Japanese insurers were interested in the Asian operations of HSBC's non-life insurance business, especially its Hong Kong business, and not the entire package, the sources said.
HSBC made and distributed general insurance products in Panama, Honduras, El Salvador, Argentina, France and Mexico. But it earns a portion of its premiums from Hong Kong and Singapore, with the two centres alone producing about $300 million, one source previously said.
HSBC's planned sale follows other recent deals to exit non-core businesses, including the disposal of its credit card unit in the United States, the closure of underperforming U.S. branches, and the sale of 195 branches to First Nigara Financial Group.-Reuters
More Finance & Capital Market Stories
- Egypt economy growth seen less strong than thought
- Sharjah approves $4.2bn budget for 2014
- Saudi non-oil sector posts solid growth in Feb
- Seera total income rises to $34m
- NBAD approves 40pc cash dividends
- NBAD sees 8-10pc loan growth
- Al Basel Group launches investment arm
- Union Insurance posts $18m profit
- Oman warns banks on conflicts of interest
- Japan to lend Tunisia $480m
- 400 to join anti-laundering seminar in Riyadh
- Lebanese insurer to head Prague Club
- UAE's first REIT plans $135m IPO
- Bahrain banking industry outlook 'positive'
- New India Assurance opens Bahrain branch
- Qatar sets up mixed business incubator
- Kuwait budget spending up 8pc in April-Jan
- Thomson Reuters to host Mena IFR awards
- ADIB offers smartphone industry investment
- Gulf Finance House to start $3bn Tunisia project
- KFH completes ICT project upgrade
- Egypt urban annual inflation slows to 9.8pc
- BIBF signs deal with Palestinian institute
- Bahrain’s GDP set to expand 12pc
- KFH-Bahrain rebrands priority banking
- Bank Nizwa wins top Islamic bank award
- Qatar labour costs may jump: IMF
- Kuwait Q3 trade surplus hits $23bn
- Dubai trade growth up 7.6pc to $362bn
- Deloitte appoints new managing director