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HSBC Insurance (Asia-Pacific) Holdings Ltd., the strategic partner of Bao Viet Holdings within 2007-2012, signed agreement to sell its entire 18 per cent stake in the local insurer to Japan’s Sumitomo Life in Hanoi on December 20, 2012.
The sale comes in line with ongoing trend of HSBC to largely divest life insurance units in Asia from early this year, in an attempt to focus on the British bank's effective markets.
The stake was priced at VND7,098 billion, approximately $340 million, according to Bao Viet Holdings’ announcement. Such price valued Bao Viet Holdings (BVH) at about VND58,000 per cent, 70 per cent higher than the share’s market price on Ho Chi Minh Stock Exchange at the close of December 20’s session.
Although the price was 5 per cent lower than the $360 million HSBC spent to purchase Bao Viet Holdings’ stake, HSBC Asia Pacific’s CEO Peter Wong said, “We believe it’s a fair value” and “we are proud of the success of our five-year partnership with Bao Viet.”
Despite the departure of such a big partner like HSBC, observers have reacted positively to the switch to Japan’s fourth-largest insurers by total assets, which had been rumored since the middle of this year. Sumitomo Life, these observers say, should help Bao Viet Holdings develop a new business stage.
While HSBC in its five-year period had supported Bao Viet most in corporate governance and insurance technique, Sumitomo Life said it would support Bao Viet in distribution quality and developing new insurance products – which are seen as two core factors to make success of an insurance company.
“They [two factors] are two strengths of us to support for this partnership,” said Yoshio Sato, CEO of Sumitomo Life.
Meanwhile, Bao Viet Holdings said it was switching into next development stage with a new strategy focusing on market extension and service quality improvement, based on the foundation it have built in cooperation with HSBC in the five-year stage after equitisation.
“The participantion of Sumitomo Life would help Bao Viet to effectively fulfill its planned strategy,” said Le Quang Binh, chairman of Bao Viet Holdings.
Also, Bao Viet and HSBC signed an agreement on continued technical support and capability transfer process transition to complete ongoing projects in Bao Viet Holdings. The agreement also ensures the effectives of technical support and capability transfer process between Sumitomo Life and Bao Viet.
“Sumitomo Life focuses on life insurance and is one of Japan’s biggest life insurers, while it also have experience in developing markets in American, China, Britain and other nations outside Japan,” said Pham Ngoc Bich, head of institutional investors division in brokerage house Saigon Securities Inc.
Fiachra MacCana, head of research in Ho Chi Minh City Securities, said “we hope the next strategic partner can help them [Bao Viet Holdings] improve their investment strategy,” which is seen as a weakness of Vietnamese insurance companies.
The stake purchased in Bao Viet represents the first entry of Sumitomo Life into Vietnamese market. The appeal of Vietnam, Sato said, included its youthful population - a contrast to Japan’s aging population and diminished prospects for insurance market growth.
“We have given interest in Vietnam and have researched the market since three years ago,” said Sato, adding that the partnership with such a financial-insurance group like Bao Viet played “a huge role to our strategy to develop business overseas.”
The transaction is expected to be completed during the first quarter of 2013, according to Bao Viet Holdings’ announcement. As HSBC still holds a seat in Bao Viet’s board and a seat on the supervision board along with some management positions, the human transfer between HSBC and Sumitomo would take place after the stake transaction was completed, Wang said.