With flagging growth forecasts and sovereign debt woes continuing to wrack the Eurozone and other Western economies, international investors are now increasingly turning their attention to emerging financial markets in the Middle East and Asia to further develop and expand their business footprint. It was announced this week that Zurich, one of the world’s largest insurance groups, has signed a landmark 10 year distribution deal with HSBC’s Middle East banking operations.
Citing a joint company filing, the deal will officially certify Zurich as HSBC’s exclusive business partner for the distribution of financial insurance products in United Arab Emirates, Qatar and Bahrain. If successful, the partnership may expand to include other Middle East and North Africa (MENA) countries at a later date, subject to future considerations.
The decade-long business alliance with Zurich is expected to improve the performance of HSBC’s commercial banking operations in the region considerably over the next few years. Zurich’s input will provide HSBC’s Retail Banking and Wealth Management (RBWM) operations with the prerequisite specialist expertise to further build their wealth insurance business across the MENA region. HSBC clients in the UAE, Qatar and Bahrain will also be given a more consistent customer service experience to more closely match international insurance standards. Speaking at the launch of the new partnership, Francesca McDonagh, HSBC’s Regional Head of Retail Banking and Wealth Management, explained that the move would be a benefit to the region’s banking and insurance sectors as a whole and was yet another stage of the bank’s ongoing global wealth transformation strategy. “This agreement falls completely in alignment with HSBC’s strategy to build longer-term, exclusive alliances with preferred strategic partners to deliver more value to our customers,” McDonagh said, adding that for HSBC “providing best-in-class wealth insurance solutions is a core part of our wealth management strategy in MENA”.
Perhaps most significant, according to McDonagh, will be the added value HSBC’s customers in the MENA region see in terms of overall service quality and product diversity, in addition to increased wealth insurance capabilities. “As a result of this collaboration, we will be able to provide greater benefits and better service to our customers. HSBC customers will see a more comprehensive, yet simple range of wealth insurance solutions aligned with their protection and investment needs, and delivered in an efficient, customer-centric approach,” McDonagh noted.
HSBC is already the MENA region’s largest and most widely represented international banking organisation, with over 270 offices and some 12,000 employees working across the region. The London-based banking group have operations in 14 countries, including Egypt, Qatar, Oman, Bahrain, Kuwait, Jordan, Lebanon, Pakistan, Algeria and the UAE. In Saudi Arabia, HSBC is a 40 percent shareholder of Saudi British Bank (SABB), and a 49 percent shareholder of HSBC Saudi Arabia for investment banking in the KSA. In Iraq, the bank holds a majority shareholding in Dar Es Salaam Investment Bank. According to their latest financial report, HSBC operations in the MENA region finished the 2011 business year with combined profit before tax of US$1.49 billion.
HSBC is now partnering with international insurers instead of expanding their own services as part of the banks new cost cutting strategy. Under the stewardship of Chief Executive Stuart Gulliver, HSBC are looking to cut annual costs by US$3.5 billion and exit countries and business lines where they lack appropriate scale, all the while focusing more strongly on the fast-growing financial markets in Asia to boost the bank’s overall profitability. This plan has seen the bank sell their general insurance book in Latin America and Asia to AXA and QBE for a combined US$914 million in cash during March, 2012.
For Zurich, the deal gives the insurer an opportunity to build upon their global relationship with HSBC and expand their services into previously untapped Middle East insurance and investment markets. Thorsten Kocherscheidt, Zurich’s Chief Executive of global life business in Middle East and Africa remarked in the press statement that the company has been a preferred strategic partner of HSBC since 2008 and would no doubt continue providing both the bank and their regional clients with exceptional insurance products and services. “Zurich and HSBC already have an extensive relationship in the Middle East and I am delighted that this has been formalized into a long-term exclusive arrangement in UAE, Qatar and Bahrain,” Kocherscheid said, further noting that these countries represent some of the region’s most important wealth markets and by expanding into these markets first, both Zurich and HSBC can test the overall condition of the MENA market. “We look forward to developing first-class propositions for HSBC’s Retail Banking and Wealth Management customers across the region. This agreement also underlines Zurich’s commitment to grow in emerging markets.”
Zurich’s expanded partnership with HSBC follows a busy period for the firm, one which has seen them establish new subsidiary operations in Singapore and Dubai over the past month. The Swiss-based insurance group expect emerging markets to now account for about half of its new life insurance premiums by 2013. Because of this goal, a move to further expand their presence in the Middle East appears logical. As the MENA region economies continue to grow, urbanize and open their markets, demand for protection, savings and investment services are only set to increase. Many countries have been updating their laws and regulation towards the insurance industry: increasing capital requirements, professionalizing risk management systems, and even opening up the field to greater foreign involvement. Insurers who can successfully target this large pool of potential customers will reap rewards and will also contribute to the economic development of the region.
HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 7,200 offices in over 80 countries and territories in Europe, the Asia-Pacific region, North and Latin America, the Middle East and Africa. With assets of US$2,556 billion at 31 December 2011, HSBC is one of the world’s largest banking and financial services organizations.
Zurich Insurance Group
Zurich Insurance Group (Zurich) formerly known as Zurich Financial Services Group, is headquartered in Zurich, Switzerland, where it was founded in 1872. Zurich is a leading multi-line insurance provider with a global network of subsidiaries and offices in Europe, North America, Latin America, Asia-Pacific and the Middle East. The company offers a wide range of general insurance and life insurance products and services for individuals, small businesses, mid-sized and large companies as well as multinational corporations. Zurich employs about 60,000 people serving customers in more than 170 countries.