HSBC Said to Consider Selling Regional Non-Life Insurance Units Separately

By Cathy Chan - Oct 4, 2011 10:07 AM GMT+0700

HSBC Holdings Plc (HSBA), the European bank seeking buyers for its non-life insurance assets, will consider selling regional units of the business separately, three people familiar with the matter said.

HSBC may receive offers for its general insurance operations in Asia and Latin America separately, though potential buyers can also submit bids for the global business, said the people. The sale may value HSBC’s non-life insurance assets at $1 billion to $1.5 billion, they said, asking not to be identified because the sale process is private.

Selling the regional operations separately may help HSBC get a higher price for the assets, as some buyers are only interested in acquisitions in Asia and Latin America, the people said. MS&AD Insurance Group Holdings (8725) Inc. and Axa SA are among possible bidders for HSBC’s non-life insurance business, people with knowledge of the matter said.

“Profit margins have been under pressure” in general insurance, said Dominic Chan, an analyst at BNP Paribas SA in Hong Kong. “If HSBC finds this business not profitable in some markets, it’s logical for them to exit those markets.”

Gareth Hewett, a spokesman for HSBC in Hong Kong, declined to comment on the sale process. Spokespeople for MS&AD, Japan’s biggest non-life insurer, and Axa, Europe’s second-largest insurer, also declined to comment.

Tougher Rules

HSBC, Europe’s largest bank, reported $1 billion of “net written insurance premiums” for its non-life business last year, down from $1.1 billion in 2009, according to its annual report. Net premiums in Asia accounted for about a third of the total, while Latin America made up 42 percent, the report showed.

Chief Executive Officer Stuart Gulliver is reversing HSBC’s expansion over the past two decades, selling assets and cutting jobs as the euro-area debt crisis saps profit and regulators demand thicker capital buffers.

The bank in July agreed to sell almost half its U.S. branches to First Niagara Financial Group Inc. for about $1 billion. HSBC said last month it will reap a $2.4 billion after- tax gain from the sale its U.S. credit card division to Capital One Financial Corp. (COF) The company has also sold part of its Russian consumer banking unit and said it will shut 10 retail branches in Poland.

European lenders will need to raise an extra 423 billion euros ($611 billion) by 2019 to comply with global capital rules approved by the Basel Committee on Banking Supervision, according to a European Union study. HSBC is cutting jobs and closing offices to reduce costs by as much as $3.5 billion over the next two years as it prepares for the stricter regulations.

The Basel committee said in July that 28 banks would be subject to additional capital requirements to rein in too-big- to-fail lenders.

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net