HSBC to launch China insurance joint venture

LONDON, May 1 - HSBC aims to launch its first life insurance joint venture in China in July or August and plans to offer pension services with a local partnership in the world's fastest growing major economy, a senior HSBC executive said on Thursday.

Europe's biggest bank is in the final stage of seeking approval from Chinese insurance regulators to launch its Beijing-based life insurance venture in which HSBC hopes to take a 50 percent stake, said Clive Bannister, head of the bank's insurance business.

However, it may take 3 to 5 years for the insurance venture to make a profit, he said.

"We hope to complete the joint venture in China and it's natural to expect the earnings (of HSBC's insurance business) will continue to be very strong in Asia Pacific after that," said Bannister in an interview at HSBC's offices in London.

If approved, the joint venture would have a nationwide business licence, allowing it to sell insurance products to Chinese clients through the branch networks of HSBC and its local partner, Bank of Communications, China's fifth biggest lender by assets.

Bannister said cooperation between branches of HSBC and Bank of Communications, would be also subject to Chinese regulatory approval.

HSBC would target high-end customers in China, focusing on HSBC's existing high-end banking clients at the initial stage of its insurance venture, said Bannister.

"We are positioning the company very differently and what we will be doing is a value proposition, not a volume proposition," he said. "Our clients (in China) will be owners of businesses and business entrepreneurs who are seeking significant life cover and protection."

HSBC makes about $2 billion in annual profit from its existing insurance business, or 10 percent of the group total.

In Britain, HSBC plans to expand its insurance business through organic growth, especially through its own bancassurance channel, telephone and online sales, Bannister said. He dismissed speculation that HSBC may grow its British insurance business through takeovers.

HSBC, which is a leading player of pension services in Hong Kong, where the bank was founded, is also in discussions with Bank of Communications -- of which HSBC owns nearly 20 percent -- on pension business cooperation.

However, it is not clear whether the two banks would eventually set up a joint venture or undertake some other form of cooperation to tap China's infant but fast growing pension market. That is partly because Beijing is still finalising the rules to allow banks to offer pension management services, Bannister said.

"We think we understand how to look after pensions, pension assets and administrations, but how we can do this in China depends on the final legislation and we have had discussions with Bank of Communications on this," he said.

China's nascent voluntary corporate pension scheme, known as enterprise annuities, is similar to the 401(k) plans that dominate corporate retirement planning in the United States.

Analysts have estimated that within a few years, enterprise annuities could surpass China's $25 billion National Social Security Fund as a source of new money to manage -- and therefore as a source of fees.

HSBC also has a 25 percent stake in an insurance brokerage in China. The Beijing-based venture focuses on Chinese companies that are expanding abroad, where HSBC can offer its international expertise on insurance advisory services, said Bannister.

Last year, HSBC became aggressive in the insurance business in Asia through several newly established joint ventures in India, South Korea, Vietnam and Taiwan.

Bannister said HSBC had done fairly well in Asia but now had to focus on making the new ventures make money. "The growth prospect in Asia is still very high."


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