HSBC to Vend Insurance Businesses - Analyst Blog
March 08 2012 - 2:30AM
Zacks
HSBC Holdings Plc. (HBC) has announced the sale
of its general insurance businesses in Asia and Latin America for
$914 million. The company will be divesting its general insurance
units in Hong Kong, Singapore, Argentina and Mexico to Australia's
QBE Insurance Group Ltd. and France-based AXA Group in two separate
deals.
HSBC’s wholly owned subsidiaries – HSBC Insurance (Singapore)
Pte, HSBC Insurance (Asia) Ltd and HSBC Seguros, S.A de C.V., Grupo
Financiero HSBC – have agreed to sell their general insurance
operations to AXA. The net asset value of these units was $48
million as of December 31, 2011. AXA will be paying $494 million
for these units, which are based in Singapore, Hong Kong and
Mexico.
Moreover, HSBC Argentina Holdings S.A, the wholly-owned
subsidiary of HSBC, will divest its general insurance unit, HSBC La
Buenos Aires Seguros S.A., to QBE. Further, Hang Seng Bank Ltd.,
another subsidiary of HSBC, has entered into an agreement to vend
its general insurance portfolio, Hang Seng General Insurance (Hong
Kong) Company Ltd., to QBE. In total, QBE will pay $420 million for
both these units, which had net asset value of $189 million as of
December 31, 2011.
These deals are expected to be completed by the end of this
year, while the Argentina agreement is scheduled to be closed
earlier. However, these agreements are still subjected to
regulatory approvals.
Additionally, following the closure of the transactions, a new
ten year bancassurance agreements that has been entered into by
HSBC and Hang Seng Bank would become effective. As per the
bancassurance agreements, AXA and QBE will become the sole
providers of general insurance products to retail and commercial
banking clients in Hong Kong, China, Singapore, India, Indonesia,
Mexico and Argentina. Further, AXA and QBE will pay commissions on
product sales and also make profit-related payments to HSBC and
Hang Seng Bank.
The current agreements are a part of HSBC’s long-term strategy
to revamp its operations for stabilizing the capital levels and
improve efficiency. In May 2011, the CEO of the company had
announced plans to reduce the operating expenses by $3.5 million by
the end of 2013 through restructuring and contraction of its global
business. Further in August 2011, HSBC had also announced its plan
to trim down the workforce by 30,000 in the next two years.
With the main intention to focus more on the fast-growing and
profitable markets, HSBC has made significant progress in shedding
its unprofitable and non-core operations by divesting or closing 19
of its operations across the globe as of February 2012. The major
divestitures include the sale of 195 non-strategic branches in the
U.S. to First Niagara Financial Group Inc. (FNFG)
for $1 billion in 2011 and its U.S. credit card business to
Capital One Financial Corporation (COF) for $32.7
billion in 2011.
Currently, HSBC retains a Zacks #3 Rank, which translates into a
short-term ‘Hold’ rating.
CAPITAL ONE FIN (COF): Free Stock Analysis Report
FIRST NIAGARA (FNFG): Free Stock Analysis Report
HSBC HOLDINGS (HBC): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Capital One Financial (NYSE:COF)
Historical Stock Chart
From Jun 2024 to Jul 2024
Capital One Financial (NYSE:COF)
Historical Stock Chart
From Jul 2023 to Jul 2024