[November 27, 2006]

HSBC aims to raise insurance, pension, annuities contributions

(BNamericas.com Via Thomson Dialog NewsEdge) UK financial group HSBC (NYSE: HBC) is aiming to raise the contribution from insurance, pension funds and annuities to group pre-tax profits, executives from HSBC told BNamericas.

"Globally, HSBC is looking for insurance, annuities and pension fund business to contribute 20% of group profits before tax within five years. In Latin America, our goal is to achieve this in 1,000 days," said Jorge Esteve, HSBC head of insurance, pensions and pension funds for Latin America and the Caribbean.

The exact contribution today to regional pre-tax group profits is difficult to give due to reorganization in some countries but Mexico, where contribution from insurance and retirement is around 17%, is a good reference point, Esteve said.

In Latin America, HSBC's main insurance and retirement businesses are in Mexico, Argentina and Brazil.

"Traditionally, the insurance market has been dominated by brokers and agents who focus on the middle and upper classes, a very small market segment. We believe low-income earners are those who need it [insurance services] most," Esteve said.

There are a large number of uninsured clients who believe insurance products are expensive, the executive said, adding the company is targeting them by offering more affordable products.

Distribution expenses tend to increase insurance costs significantly, which is why the company relies on bancassurance channels, Esteve said.

"Bancassurance is a very efficient [distribution] route that enables us to provide products to a large number of clients at very attractive prices," said Juan Alberto Vlez, HSBC head of insurance and pensions in Mexico.

Bancassurance not only eliminates the high distribution costs associated with agents and brokers but also reduces insurance prices some 20%, Esteve added.

ONE-STOP SHOP

Part of HSBC's overall strategy is to become a provider of financial solutions for its clients, the executive said.

"In Mexico, we bought the local pension fund unit of [German insurer] Allianz because we want to offer a one-stop shop solution to our clients, offering them loans, insurance and pension fund plans," Esteve said.

HSBC acquired Afore Allianz Dresdner in 2003 for US$200mn and subsequently changed the name to HSBC Afore.

As of October 31 this year, HSBC Afore reported 28.7bn pesos (US$2.59bn) in assets under management, equivalent to a 4.2% market share, ranking 10th among the country's 18 Afores.

The pension fund company forms part of Mexico's fourth largest financial group Grupo Financiero HSBC, with US$25.9bn in assets as of September 30. Its flagship company is the country's fourth private sector bank HSBC, which had an 11% loan market share at end-June.

On the insurance side, the largest company of the group is non-life insurer HSBC Seguros, which reported written premiums of 951mn pesos for the first half of the year. The company was the 16th largest insurer with a 1.2% market share on the basis of total premiums written at June 30.

"Our bancassurance business model has been very successful in Mexico and we now have the opportunity to develop it in [other countries in] Latin America," Vlez said.

CENTRAL AMERICA

HSBC recently added Panama-based financial group Grupo Banistmo to its worldwide franchise for US$1.77bn in cash, a move that primarily strengthens its presence in Panama, home to 3 million people with a GDP of US$15.5bn in 2005.

The main subsidiary of the Central American group is Panama's largest bank Banistmo, which controlled 15% of the US$34.2bn unconsolidated assets reported by the country's onshore banking system at end-June.

On the insurance front, the main acquisition is Panamanian multi-line insurer Conase, which controls the British Virgin Islands' Caribbean Reinsurance Company and Honduran insurer Seguros El Ahorro Hondureo.

El Ahorro Hondureo reported 311mn lempiras (US$16.5mn) in written premiums for the first half. The company ranked third among the country's 10

Copyright 2006 BNamericas.com

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