Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
Separately, the firm is working with Vietnam Insurance (BaoViet) to offer the first unit-linked investments in that country, with the hope that the Ministry of Finance will approve this sometime in 2008, says David Fried, Asia-Pacific regional head of insurance in Hong Kong.
Currently the insurance division in Asia Pacific (which includes Japan, Australia, India and parts of Africa, but not the Middle East) contributes around 8% of the regionÆs profits, although in Hong Kong itÆs 13%. So the 20%-of-group-profits is a long-term ambition, but the Asia team is working on multiple fronts to reach it. Worldwide, insurance contributes $1. 6 billion, or 11%, of HSBC Group profits (but a third of that already comes from Asia Pacific).
Fried moved to Hong Kong to assume this role last October from London, where he participated in the groupÆs strategic decision to elevate the role of insurance in its global business. HSBC has been aggressively building an insurance role around the region in the time since.
He inherited a few business silos that included a life and non-life business in Hong Kong, as well as HSBCÆs market share-leading Mandatory Provident Fund operation, which included not only manufacturing and distribution but also administration of the funds. It also had a group stake in Ping An Life Insurance in China, the acquired Keppel Insurance in Singapore, and insurance broking operations around the region.
First on FriedÆs agenda has been to bring some cohesion and strategic direction to this business, which includes working more closely with HSBC Investments, HSBC Trustee and HSBC Investment Funds Services, as local regulations permit. Second has been to ramp it up in key markets. Third is to pursue organic growth, which takes up much of his time in the form of seeking out or retaining experienced professionals; the number of people at HSBC Insurance focused on non-Hong Kong matters has grown from two to around 50 since FriedÆs arrival.
FriedÆs predecessor, CF Choy, who had run just HSBC Insurance for Hong Kong and now focuses on growing the business in China, had already got the ball rolling on a few initiatives that Fried has seen through. These include using HSBCÆs life insurance license in Hong Kong to open a branch in Taiwan, as well as getting one for Shanghai.
The firm has also decided to concentrate on the life side of the insurance world, which better fits its focus on pensions and investments. It intends to use the bancassurance model it developed in Hong Kong in other markets where regulations allow. An example is the recent joint venture announced in India with Canara Bank and Oriental Bank of Commerce.
Since FriedÆs arrival, HSBC has also opened a takaful (Islamic) insurance JV in Malaysia with the EmployeesÆ Provident Fund and Jemeh Insurance (owned by the Kuok family); and established a rep office in Hanoi and taken a stake in BaoViet. Today it is a 10% holding, with options that allow HSBC to step up gradually to 49% as the Ministry of Finance divests.
BaoViet is also a pioneering asset manager in Vietnam and is keen to marry this with the insurance world by introducing unit-linked investment products, and HSBC is advising it on this process.
Unit-linked is a growth business throughout the region, and one of HSBCÆs focuses in insurance. This past May, it introduced US-style variable annuities to Hong Kong, and has so far racked up $900 million in sales. It also has unit-linked in Singapore and Malaysia, and hopes to follow in China, India and Taiwan where possible.
Another focus product-wise is credit protection for the regionÆs burgeoning numbers of new consumers, evident in things such as the rocketing use of credit cards. ôThese can allow individuals to protect their family from debt,ö Fried says.
A third focus is on servicing retirement needs, which ties in with investment management, trusteeship, custody and fund administration. ôOur MPF business shows how we can tie all of this together,ö he says, adding that in other markets it has often been the insurance piece that was missing û and which he plans to now energise, by providing annuities, employee benefits and group life policies.
The challenge is operating across a slew of fragmented markets. ôI would like to see more freedom to enter markets,ö he says. ôBut each country has its own rules and regulations.ö This creates costs but Fried argues that HSBC, given its reliance on a bancassurance model, is well positioned because this is a lower-cost distribution platform than relying on a tied agency salesforce.
Under the terms of this latest agreement in Seoul, HSBC Insurance and Hana Financial Group will have equal representation on Hana LifeÆs board of directors. Hana Life was established in 2003 to underwrite and distribute life insurance products for personal and corporate customers. It currently has about 113,000 policies in force and premium income was W207 billion ($228.3 million) for the year ending on 31 March 2007. Total assets were W705 billion ($777.5 million) with W624 billion ($688.1 million) of assets under management as at 31 March 2007. The company employs around 120 people and benefits from access to Hana Financial GroupÆs seven million customers through more than
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