HSBC has agreed to sell its general insurance businesses to French insurer AXA Group and Australia's QBE Insurance Group for $914 million (€694.8 million) in cash.
The deal, the latest in a series of cost cutting initiatives under new HSBC chief executive Stuart Gulliver, includes 10-year bancassurance agreements with AXA and QBE and shows as Europe's biggest bank moving ahead with plan to divest non-core assets.
The agreements will earn commissions and profit-related payments for HSBC on top of the cash value of the deal.
HSBC's decision to exit the business could be a precursor to similar deals as lenders globally consider selling capital-intensive businesses as reserve requirements become more strict.
"We expect rising capitalisation requirements across the banking and insurance sectors to continue to drive portfolio re-balancing, with some banks in particular reflecting on the value of manufacturing and/or distributing non-life insurance going forward," said Ron Kozlowski, director of Towers Watson's general insurance consulting business in Asia Pacific.
For AXA, the acquisition is a step forward in its effort to boost emerging markets presence and potentially help Europe's second largest insurer to achieve its 2015 targets ahead of time.
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 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.
HSBC shares fell 1.5 per cent to HKD$67.85 by late afternoon in Hong Kong trade, more than the 0.8 per cent drop in the benchmark Hong Kong share index. QBE shares rose 0.8 per cent to Aus$11.94, bucking a 1.5 per cent fall in the benchmark Australian share index.
AXA is paying $494 million for the assets in Hong Kong, Singapore and Mexico, which had a net asset value of $48 million 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 $420 million for the business in Argentina, which had an net asset value of $189 million. 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.
Reuters