HSBC Possible To Buy Into Aviva's Asian Operations To Bolster Insurance Presence In The Region

HSBC Possible To Buy Into Aviva's Asian Operations To Bolster Insurance Presence In The Region
HSBC's building in Canary Wharf is seen behind a City of London sign outside Billingsgate Market in London, Britain, August 8, 2018. (Photo: REUTERS/Hannah McKay)

HSBC Holdings Plc, who had dramatic changes in its senior leadership just this month, is looking into the Asian operations being sold by Aviva Plc because it will help the company diversify and have a strong insurance presence in Asia.

People with knowledge of this matter said that HSBC is considering Aviva's offer as part of its Asian business because this will help cement its insurance presence not only in Singapore, and Hong Kong where it currently has branches, but also in other parts of Southeast Asia.

This option to sell Aviva's Asian business was agreed upon by Aviva's management upon the start of new Chief Executive Officer Maurice Tulloch's tenure.

Tulloch said that in refreshing Aviva's strategy, he and the board looked into the strategic options of the company's Asian businesses and because Aviva's businesses in Asia have excellent growth and earnings potential, Aviva is into options of helping other businesses reach their potential.

Aviva has its share drop 27% in the last 12 months. However, the company's operations in the region is still about $3 billion to $4 billion.

Though no one from Aviva or HSBC would comment, there seems to be other interested parties for the Aviva Asian assets.

Aviva is aware of the market of the rapidly rising middle class consumers in Asia, many of whom are potential new customers in insurance policies.

Singapore is the largest potential market. Life insurance there is making 1.3 billion pounds ($1.6 billion) in new business.

Aviva's annual report states it has 141 million pounds in adjusted operating profit in 2018 just in Singapore only.

Acquiring Aviva's Asian assets could be the turnaround HSBC needs after this August saw HSBC Chief Executive Officer John Flint kicked off from the job after just 18 months.

HSBC has Noel Quinn now as interim group chief executive.

People knowledgeable on the matter said that Flint was at odds with HSBC Chairman Mark Tucker over Flint's focus on the company's expansion in China.

After Flint got ousted, HSBC China's head of business resigned and job cuts of about 4,000 got announced.

HSBC's presence is smaller in Singapore. However, Hong Kong, where HSBC generates more than half of its pretax profit, has left many worried about the city's growth prospects.

Still, HSBC's revenue in Asia during the first half of 2019 saw a 7% rise while Aviva has a general insurance combined operation ratio of 111.2% for its "Asia & Other" market in the same period.

Bloomberg says that Aviva's Singapore business will be the center of HSBC's business decision in Asia.

It also added that Singapore's FWD and Japanese insurers might also be interested in Aviva's units in China, India, Indonesia and Vietnam.

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