HSBC Bank plc and Norwich Union Insurance, the U.K. operating company of the Aviva Group, announced plans to create a joint-venture general insurance company to underwrite and distribute products to HSBC’s 10.2 million customers in the U.K.
A bulletin from HSBC noted that the new venture would operate under the “HSBC Insurance brand.” HSBC presently sells protection, home, travel and car insurance products in its bank branches through Norwich Union. They now aim to create “a top-10 player in the UK general insurance industry.”
HSBC also indicated that “approximately one-fifth of all UK consumer spending on financial services “goes to insurance products and the general insurance industry generated £36 billion [$71.26 billion] in premiums in 2005.”
HSBC’s CEO Dyfrig John said the venture with Norwich Union would combine the Bank’s “distribution network” and Norwich Union’s “underwriting and customer management capabilities” to create “one of the best general insurance services the market has to offer.” It’s also an opening for HSBC to offer its customers more services to correct the fact that its has “historically punched below its weight in insurance,” according to John.
Norwich Union’s Chief Executive Simon Machell said he is excited “continuing to grow our relationship with HSBC.” He emphasized the dual nature of the combination, HSBC’s “strong brand,” and the prospects of maximizing “the value of their general insurance portfolio.” Machell indicated that the joint venture would “create a significant new force in the UK insurance market.”
As well as creating a joint venture, HSBC said it intends to sell Hamilton Insurance Company Ltd. and Hamilton Life Assurance Company Ltd. to companies within the Aviva group. The Hamilton companies are currently owned by HFC Bank Limited, a subsidiary of US-based HSBC Finance Corporation.
The partnership with Aviva may well signal a move on the part of one of the world’s largest banks. It has around 10,000 offices in 82 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa.
Clive Bannister, HSBC’s Group Managing Director, Insurance, said the bank has “”set a target to double the contribution to global profits made by our insurance operations.” A part of that strategy is the creation of “preferred strategic partnerships with leading general insurers.”
The project is in its early stages. The actual formation and operation of the joint venture remains subject to “”definitive documentation as well as regulatory and other consents,” said the bulletin. “The level of capital to be contributed by each party to the joint venture will be agreed and confirmed at a later date.”
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