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HSBC Sells Singapore Insurance Biz

Zacks Equity Research

In an effort to shed its non-core assets and improve efficiency, HSBC Insurance (Singapore) Pte Limited – an indirectly fully-owned subsidiary of HSBC Holdings plc (HBC) – has entered into a deal to sell Singaporean group term life insurance and group medical insurance operations. AXA Life Insurance Singapore Private Limited will be buying these businesses worth nearly S$23.5 million ($19.3 million) as of Dec 31, 2012.

The deal is still subject to regulatory approvals as well as other customary closing conditions. HSBC stated that the transaction is expected to be closed by the end of 2013.

Concurrently, a new 10-year bancassurance agreement has been entered into by The Hongkong and Shanghai Banking Corporation Limited, an indirectly fully-owned subsidiary of HSBC. As per the bancassurance agreements, AXA Asia SAS and AXA General Insurance Hong Kong Limited will become the sole providers of group term life and group medical insurance products to retail and commercial banking clients in Singapore. Further, both these companies will be paying commissions on product sales to HSBC.

The aforesaid agreements are a part of HSBC’s long-term strategy to revamp its operations for stabilizing the capital levels and improve efficiency. Since 2011, the company has been resorting to aggressive restructuring, having sold more than 45 non-core or unprofitable assets globally.

The sale of the insurance operations in Singapore will not only bring long-term benefits for HSBC, but also help the company concentrate on its emerging market strategy. Moreover, we expect HSBC to continue with such strategic sale of businesses, thereby enhancing its capital strength, going forward.

Apart from HSCB, many European banks including Deutsche Bank AG (DB), Credit Suisse Group (CS) and ING Groep NV (ING) have been divesting non-core assets and eliminating jobs to reinforce profits over the past couple of years.

Currently, HSBC carries a Zacks Rank #3 (Hold).

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