HSBC Holdings Regulatory News (HSBA)

5 Mar 2007 08:33

HSBC Holdings PLC05 March 2007 CANARA BANK, HSBC AND ORIENTAL BANK OF COMMERCE TO ESTABLISH LIFE INSURANCE COMPANY IN INDIA Canara Bank, HSBC Insurance (Asia-Pacific) Holdings Limited and Oriental Bank ofCommerce (OBC) have today signed a non-binding Memorandum of Understanding tojointly establish a life insurance company in India. The new company will have exclusive access to the customer bases of both of theState-owned banks, Canara Bank and OBC, and of HSBC in India. This comprisesmore than 40 million people and a nationwide network of 3,600 branches. Thisformidable distribution capability will be used by the company to become asignificant player in the country's rapidly expanding life insurance industry. Under the proposed agreement, Canara Bank will take a 51 per cent stake in thenew company, HSBC a 26 per cent interest and OBC the remaining 23 per cent. Thenew life insurance company will be capitalised at INR3,250 million(approximately US$73 million), of which HSBC will contribute INR1,770 million(approximately US$40 million), Canara Bank INR1,020 million (approximately US$23million) and OBC INR460 million (approximately US$10 million). Under the termsof the agreement, HSBC will provide a range of management services, which mayinclude providing executives for senior roles. Life insurance premiums in India grew at an annual rate of 21 per cent in thesix years following the opening of the market to private players in 1999,exceeding US$20 billion in 2005. From April to November 2006, new life insurancepremiums grew by 155 per cent, according to the business figures released byIndia's Insurance Regulatory and Development Authority. However, with apenetration rate of only 2.5 per cent in 2005, India's nascent life insurancemarket has considerable long-term growth potential. Shri M B N Rao, Chairman and Managing Director, Canara Bank, said: "Canara Bank,which has built up a distinguished track record of performance and serviceexcellence over 100 years, has emerged as a front ranking banking institution inIndia. Recognised as a financial conglomerate with a strong presence acrossvaried financial markets, the Bank has been providing a wide array of need basedbanking and financial services to its fast growing cross section clientele.Among others, Canara Bank has already established its presence in Mutual Fund,Factoring, Housing and Venture Capital Financing activities through itssubsidiary companies and insurance domain by distributing insurance products -both life and non-life through its network of branches. "The signing of the MoU today to promote a life insurance company with HSBCInsurance and Oriental Bank of Commerce marks a significant step forward forCanara Bank in terms of creating and delivering value added insurance productsnot only to the existing customers but also to the customers and prospects ofour partner institutions. By collaborating with HSBC we shall be in a positionto bring the best of international insurance products to the fast growing Indianmarkets. "I have no doubt indeed that the domain expertise of HSBC with the strongnetwork and presence of the Indian Public Sector Banks augurs well for thesuccess of our alliance." David Fried, Regional Head of Insurance Asia Pacific for HSBC, said: "This is aunique opportunity to expand HSBC's footprint in one of our major emergingmarkets and to bring to the partnership considerable insurance experience,product range and our proven bancassurance capabilities. HSBC has an extensiveand successful bancassurance operation in over 40 countries around the worldserving more than 30 million customers, in both developed and emerging markets.HSBC has been in the insurance business since 1808, employs over 6,000 staff inthe manufacturing and sourcing of insurance products globally and has 40,000staff involved in selling insurance. HSBC Insurance also has a long history inAsia and we are recognised in the industry for our prudent management and highquality of service. In Hong Kong, HSBC Insurance has won industry awards such asAsia Insurance Review's Life Insurance Company of the Year in 2006, for being apioneer in product and service excellence as well as for our effective and soundfinancial management. "The financial services industry in India has seen remarkable development overthe past few years and life insurance has been a key part of that success story.Working closely with our two partners, and by bringing our rich experience toIndia, we believe we can build a significant presence in India's life insuranceindustry. The sector has experienced rapid development since it was opened up in1999 and we expect to see that robust growth continue over the next decade. Itis an extremely promising time to be entering this market." Shri Prithviraj, Chairman Oriental Bank of Commerce, said: "OBC has a strongpresence in rural and semi-urban areas of northern India with 1,350 branches andextension counters in all important centres across India. Our 14,500 strongwork-force is dedicated and committed to exploring new business activities.Around 950 employees have already been handling life and general insurancebusinesses for the past three years. With this alliance, OBC will augment itsrevenue streams by improving return on equity after breakeven and commissionearnings from premia mobilized. Since OBC understands the needs of the localpopulace, our input into the design of customer-friendly life insurance productswill enable the partners to garner market share. OBC will help formulateproducts for Inclusive Growth for the needy sectors of society, so as to extendthe Social Security net to the deserving." Completion of the transaction is subject to various conditions includingobtaining regulatory and other approvals and agreeing final terms among thepartners. Notes to editors 1. Canara BankCanara Bank, established way back in 1906, is today the largest nationalizedbank in India in terms of aggregate business comprising of deposits and loans.It has an asset size valued at about US$30 billion as at 31 March 2006. 73.17%of the Bank's ownership is with the Government of India. Known for its strongfundamentals and sound business policies, Canara Bank has the distinction ofposting profits every year since inception. The Bank has a network of over 2,500branches nation-wide and 47,000 employees serving more than 28 millioncustomers. It has a credit rating of BBpi and AAA/Stable from Standard & Poor'sand CRISIL (Credit Rating Information Services of India Limited) respectively. The Bank offers today a host of e-enabled delivery channels, including 996 ATMs,1,315 Anywhere Banking Branches and more than 1100 branches offering Internetand Mobile Banking facilities. 2. Oriental Bank of Commerce (OBC)OBC is the eleventh largest bank by assets, which totaled US$13bn at 31 March2006. It has more than 1,100 branches throughout India and over 14,500 staffserving its 10 million customers. The India Government owns 51.1 per cent ofOBC, which has a credit rating of BBpi and AA+/FAAA/P1+ from Standard & Poor'sand CRISIL. 3. HSBC Insurance (Asia Pacific) Holdings LimitedHSBC Insurance (Asia Pacific) Holdings Limited is the parent company of fourunderwriting companies, collectively known as HSBC Insurance - HSBC Insurance(Asia) Limited, HSBC Life (International) Limited, HSBC Insurance (Singapore)Pte Limited and HSBC Amanah Takaful (Malaysia) Sdn Bhd (49% held). HSBCInsurance offers customers the security, confidence and convenience of doingbusiness with one financial services organisation. It has offices in the HongKong Special Administrative Region (SAR), the Macau SAR, Singapore and Malaysia.In mainland China, it has representative offices in Beijing, Shanghai andGuangzhou. HSBC Insurance (Asia Pacific)'s total assets stood at HK$80 billionat the end of June 2006. 4. HSBC in IndiaThe Hongkong and Shanghai Banking Corporation Limited in India offers a fullrange of banking and financial services to its over 2 million customers throughits 47 branches and 170 ATMs across 26 cities. HSBC is one of India's leadingfinancial services groups, with over 25,000 employees in its banking, investmentbanking and capital markets, asset management, insurance broking, softwaredevelopment and global resourcing operations in the country. The Bank is thefounding and a principal member of the HSBC Group which, with around 9,500offices in 81 countries and territories and assets of US$1,738 billion at 30June 2006, is one of the world's largest banking and financial servicesorganisations. This information is provided by RNS The company news service from the London Stock Exchange