HSBC and Aviva will form joint venture

London: Britain's largest bank, HSBC, and its largest insurer, Aviva, plan to create an insurance joint venture that will underwrite and distribute general insurance products to HSBC's 10 million UK customers. The deal will boost HSBC's undersized UK general insurance presence and should help the bank meet its target of doubling the contribution to global profits made by its insurance operations. Aviva, meanwhile, should reap higher benefits from sales to HSBC customers and boost its distribution reach.

"We have been punching below our weight in insurance. We didn't have the most powerful operation, we didn't have scale and this is a scale business," Dyfrig John, chief executive of HSBC Bank, told reporters. "Now was the time for us to focus." The two sides said they aimed to make the venture, which will be branded 'HSBC Insurance', a top 10 firm in UK general insurance - implying annual premiums of around £600 million ($1.2 billion) - but said it was too soon to give details on the capital to be contributed by either side.

The deal is set to be completed in the second half of 2007.

Bancassurance deals have become critical for insurers as the distribution of both life and general insurance changes, moving away from traditional sales through intermediaries.

Aviva, which has major bancassurance deals in Italy, Spain, Ireland and elsewhere, already has a lucrative UK life and pensions partnership with Royal Bank of Scotland and has said it plans to develop its reach by expanding bancassurance.

Comments

This venture will support HSBC's aim to double the revenues gained from insurance. It will certainly increase market share of HSBC in UK and the effects of this deal on HSBC's worldwide insurance operations will be seen in the near future as well..