HSBC weighs future of Singapore life insurance business as analysts assess impact on wealth strategy

[SINGAPORE] HSBC said on Friday (Jan 16) that it would conduct a strategic review of HSBC Life, its insurance manufacturing business in Singapore.

The review will cover only HSBC Life Singapore, and consider all options for the insurance manufacturing business. No decision has been made yet, said the bank.

Its announcement came shortly after Bloomberg reported that the Hong Kong-based bank was exploring options for its insurance unit in Singapore, including a sale which could be valued at more than US$1 billion. The brand offers products for life and critical illnesses, savings, personal accident and health.

HSBC on Friday said that the review is part of the group’s global “ongoing simplification” drive.

Valuation-driven

Kathy Chan, equity analyst at Morningstar, expects the sale – if materialised – to be valuation-driven.

“It’s a question of where HSBC sees better returns on its capital,” she said. “If the selling price is attractive, it probably is enticing for HSBC to sell what is probably not as much of a core business to them.”

Goh Jing Rong, assistant professor of economics (practice) at the Singapore Management University, noted that HSBC Life’s business in Singapore is not among the largest by volume, even though it is still a meaningful player.

But Ben Charoenwong, associate professor of finance at Insead, noted that while the brand has strong affinity among affluent clients – as reflected in industry rankings – this may not translate into broader market scale.

The affluent segment alone may fall short of providing the margins needed to support a standalone insurance business, he added.

Amid rising capital and compliance requirements, smaller or mid-tier insurers may increasingly pursue scale-enhancing deals or strategic exits rather than compete head-on with market leaders, said Prof Goh, who is also a qualified actuary.

This could signal ongoing rationalisation and a focus on scale and efficiency, even though the sector may not be overcrowded yet, he noted.

He added that there have been indications of early interest from other insurers and investment firms for HSBC Life – suggesting the potential for demand and attractive valuations – making the divestment timely from a shareholder value perspective.

Furthermore, Prof Charoenwong pointed out that the reported potential valuation of more than US$1 billion would be nearly double what HSBC paid for AXA Singapore just four years ago.

In 2022, HSBC Life acquired AXA Insurance in Singapore for US$529 million. This signals that the business has grown, and that the valuation may reflect a strategic premium for market access rather than pure market position, he said.

“If HSBC can realise this valuation while maintaining distribution access through bancassurance arrangements, this could be an astute capital allocation decision that creates value for shareholders.”

Singapore as a wealth hub

Industry observers noted that Singapore remains a key player in the bank’s wealth strategy.

HSBC has opened wealth-focused branches in the city-state and launched a wealth proposition for entrepreneurs here; it found that Singapore is Asia’s preferred offshore-wealth destination.

The bank’s Singapore wealth head also said the Republic is one of its four priority markets for the segment.

Thus, Morningstar’s Chan said that it is possible for HSBC to keep the insurance business for strategic purposes.

However, she noted that the bank’s sale of its insurance units elsewhere likely indicates a willingness to exit smaller jurisdictions where growth may be slower.

It also reflects management confidence that they can build their wealth business without the life insurance unit, she added.

Meanwhile, Prof Goh said that some clients may value having insurance and banking under one roof.

In this case, HSBC would likely need strong referral or establish bancassurance partnership to maintain a comprehensive and competitive proposition after the sale, he explained.

HSBC is undertaking a revamp of its global business under chief executive officer Georges Elhedery. This included the sale of its UK life insurance business and French life insurance unit last year.

“HSBC is focused on increasing leadership and market share in the areas where it has a clear competitive advantage and where it has the greatest opportunities to grow and support its clients,” said the bank in a statement. “Singapore is a priority market for the group and HSBC continues to accelerate growth in wealth and wholesale banking.”

The bank added that it will make more announcements when there is additional information.