HSBC Insurance is planning to grow its onshore China team and diversify its investment portfolio as it closes in on the goal of becoming the first wholly foreign-owned life insurer since the mainland relaxed ownership rules this year.

The insurer last week agreed to acquire the remaining 50% equity interest in HSBC Life China, its life insurance joint venture (JV) with National Trust. The transaction, which is still pending approval from the China Banking and Insurance Regulatory Commission (CBIRC), came after China allowed full foreign ownership of life insurers on January 1.

Bryce Johns

China is central to HSBC's strategy of accelerating growth within the Asian franchise. The country's life insurance market is expected to become the largest globally by 2030, and this transaction will support the company's growth in this area, Bryce Johns, global chief executive of HSBC Life, told AsianInvestor.

"Full ownership of HSBC Life China will enable us to expand our balance sheet, give us greater flexibility in accelerating our growth plans, and support our aim to become China's leading foreign insurer," he said.

In line with the acquisition move, he also said the bank's insurance unit is planning to hire more investment staff, especially as it seeks to invest in new assets.

"We have an onshore investment team in China that is right-sized relative to our investment portfolio, and we have plans to expand this capability in line with the growth plans for our business in the future," Johns said.

"As we continue to grow and explore opportunities to expand further and diversify into new asset classes, this will be accompanied by the required specialist investment professionals," he said.

He declined to disclose HSBC Life China's assets under management, the number of investment staff it has now, or give details of the types of assets it will tap into.

However, Johns said HSBC Life China most recently invested in high-quality infrastructure debt plans. CBIRC granted HSBC Life China the "advanced credit risk management capability license" early this year.

HSBC Life China was formed in 2009 as a 50/50 JV between HSBC and National Trust. As of December 2019, it had a registered capital of Rmb1.02 trillion ($144.62 billion). Headquartered in Shanghai, HSBC Life China is present in nine key mainland cities covering Shanghai, Beijing and others. Its premium income was up 28% year-on-year to Rmb1.82 billion in 2019.

HSBC also has other JVs in China - HSBC Jintrust (an asset management venture with Shanxi Trust & Investment) and HSBC Securities Qianhai (a securities partnership with Qianhai Financial Holdings).

When asked about whether it plans to buy out these JVs as China liberates its financial market, the bank only said it is currently focusing on taking up full ownership of HSBC Life China.

FOREIGN FORAY

While foreign JVs account for less than a tenth of China's insurance market today, the further opening of the insurance industry to foreign players will allow HSBC to scale up its operations, especially in the Greater Bay and Yangtze River Delta regions, Johns said.

China's relaxation of its regulations surrounding foreign ownership is not only drawing the attention of HSBC. Many international insurance players have already entered or are expanding their businesses in the country, and more are expected to follow suit.

In January, Allianz became the first foreign insurer to have a wholly-owned insurance holding company in China.  "Our strategy is first to bring our life company, followed by the property and casualty business and others, under the umbrella of the [holding company]," a company spokesman said.

Hong Kong headquartered AIA too has plans. "Following the announcement late last year of the further opening of mainland China to foreign life insurers, we submitted an application for regulatory approval to convert our Shanghai branch into a subsidiary," the insurer said when it announced its 2019 results in March.

Separately, Axa said in December that it had completed the acquisition of the remaining 50% stake in Axa Tianping Property and Casualty (P&C) Insurance Company from its domestic shareholders, becoming the largest 100% foreign-owned P&C insurer in the Chinese market.

However, international players may have to be prepared for uncertain regulatory timetables in the China market.

Standard Life's subsidiary Heng An Standard Life (HASL) gained approval to establish a new pensions insurance company in March 2019. The entity had to complete the preparatory work by March 2020, underwent a regulatory review before finally receiving the statutory licence to start the business.

However, a company spokeswoman said HASL is still in the process of establishing a pensions insurance company, pending approval from the Chinese regulator. The delay was caused by the coronavirus pandemic, she said.

Hong Kong-based insurer FWD also took advantage of the spirit of liberalisation to apply for a licence to operate a majority-owned JV in China in May 2018. An FWD spokesman said the Hong Kong-based insurer is still waiting for regulatory approval of the application.