power base
UK bancassurer HSBC drove its expansion plans in the Asian
insurance market forward vigorously in September, officially
opening its first life insurance unit in Taiwan and sealing deals
that will lead to the establishment of new life insurance companies
in India and China and giving it a strong foothold in Vietnam’s
insurance market.
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“We are extending our footprint at full speed across the region,
which is [HSBC’s] largest insurance contributor, accounting for 33
percent of the group’s insurance profitability,” said David Fried,
HSBC’s regional head of insurance for the Asia-Pacific region.
“With our developments in Asia, we are well on our way to achieving
our goal of doubling the contribution from insurance to group
earnings and becoming a top ten global player.”
HSBC’s insurance business generated a pre-tax profit of $1.6
billion in the first half of 2007 and contributed 11 percent to
HSBC Group’s total earnings. HSBC has set a target for insurance
operations to contribute 20 percent of group earnings.
In Taiwan the launch of HSBC Life (International) followed the
granting of a licence from Taiwan’s Financial Supervisory
Commission in August this year. The new unit, which will offer life
insurance, long-term savings and retirement products, will focus
its distribution thrust on the bancassurance channel. HSBC, which
has been operating in Taiwan’s banking industry since 1984,
operates eight branches island-wide.
Taiwan holds potential
Despite the high market penetration of life insurance in Taiwan –
11.6 percent of GDP in 2006, according to reinsurer Swiss Re – John
Holden, MD of HSBC Insurance in Taiwan, believes the market still
offers “huge growth potential”. Potential lies in increasing the
average sum assured. “Statistics show that the average sum assured
in Taiwan is only NT$1.28 million [$39,225], low compared to the
NT$2.16 million in Japan and NT$5.08 million in the US,” said
Holden.
HSBC’s move into India follows the formalisation of an earlier
memorandum of understanding to establish a joint venture (JV) life
insurance company between HSBC and two Indian banks, Canara Bank
and Oriental Bank of Commerce (OBC). The new Indian insurance
company will have a distribution reach encompassing 3,600 bank
branches throughout India and will target 29 million Canara Bank
customers, 10 million OBC customers and 2 million HSBC
customers.
To be named Canara HSBC Oriental Bank of Commerce Life Insurance
Company Limited, the JV will be 51 percent owned by Canara Bank, 26
percent by HSBC and 23 percent by OBC, and have an initial capital
of $80 million. HSBC, which will provide a range of management
services and nominate certain executives, will contribute $43.6
million of the JV’s capital, Canara Bank $25.1 million and OBC
$11.3 million.
Following hard on the heels of its Indian JV agreement, HSBC
announced that it had acquired a 10 percent stake in Vietnam’s
largest composite insurer, BaoViet (Vietnam Insurance Corporation),
for $255 million. HSBC, which becomes state-owned BaoViet’s sole
foreign strategic partner, has committed to hold its shares in
BaoViet for a minimum of five years.
During the five-year period HSBC has an option to purchase an
additional 8 percent of BaoViet shares from the Ministry of Finance
and has certain pre-emptive rights to acquire shares owned by the
ministry, subject to its total shareholding being limited to 25
percent within the first five years and prevailing foreign
ownership limits thereafter.
Under its strategic partnership with BaoViet, HSBC said, it would
offer the Vietnamese company technical assistance across all its
businesses, with a focus on enhancing its insurance capabilities.
This will include the secondment of specialist HSBC employees and
the provision of training to BaoViet.
According to HSBC, BaoViet is market leader in both life and
general insurance measured by premium income and operates 126
branches and 400 sub-branches, and employs 40,000 agents. BaoViet
Life, one of eight life insurers in Vietnam, had 1.6 million life
policies in force in 2006 while BaoViet Insurance, one of 16
general insurers, had 20.2 million policyholders and a market share
of 35.2 percent. The BaoViet group had total assets of $1.04
billion at 31 December 2006.
Joint venture in China
Rounding of a frenetic month of activity, HSBC announced that it
was to establish a JV life insurance company in China following the
receipt of initial regulatory approval from the China Insurance
Regulatory Commission. The JV will further extend HSBC’s presence
in mainland China, where it already holds a 16.8 percent stake in
composite insurer Ping An Insurance, which it has held since 2002,
and a 24.9 percent stake in a JV insurance broker, Beijing HSBC
Insurance Brokers, established in 2003. HSBC also has
representative offices in life and general insurance in Beijing,
Shanghai and Guangzhou and an insurance broking representative
office in Beijing.
The new life insurance company, which is still subject to
compliance with certain regulatory commission requirements within
12 months, will be formed in alliance with National Trust, a
privately held trust company authorised to offer comprehensive
financial services throughout China. The core businesses of
National Trust are asset management, investment banking and wealth
management.
HSBC and National Trust will each hold 50 percent stakes in the new
insurer, which will have an initial equity capital of CNY500
million ($67 million).
