HSBC 2008 Annual Report Download - page 33

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Gains arising from dilution of interests in
associates
In 2007, HSBC’s associates, Industrial Bank,
Ping An Insurance and Bank of Communications
in mainland China, Financiera Independencia in
Mexico and Techcombank in Vietnam issued new
shares for which HSBC did not subscribe. As a
consequence of the new monies raised by the
associates, HSBC’s share of their underlying assets
increased by US$1.1 billion, notwithstanding the
reduction in the Group’s interests. These gains were
presented in the income statement as ‘Gains arising
from dilution of interests in associates’, and should
be regarded as exceptional.
Net earned insurance premiums
2008
US$m
2007
US$m
2006
US$m
Gross insurance premium income ................................................................... 12,547 11,001 6,455
Reinsurance premiums .................................................................................... (1,697) (1,925) (787)
Net earned insurance premiums ...................................................................... 10,850 9,076 5,668
2008 compared with 2007
Reported net earned insurance premiums amounted
to US$10.9 billion, 20 per cent higher than in 2007.
HSBC acquired the remaining interest in HSBC
Assurances in France in March 2007 and, in October
2007, sold the Hamilton Insurance Company
Limited and Hamilton Life Assurance Company
Limited in the UK. On an underlying basis, net
earned insurance premiums increased by 14 per cent.
Growth in net earned insurance premiums was
driven by a continued strong performance from the
UK life assurance business, mainly as a result of
higher sales of the Guaranteed Income Bond, a non-
linked product that was launched in June 2007. The
introduction of enhanced life assurance benefits to
certain pension products, which led to these products
being reclassified as insurance contracts, also
resulted in higher premiums.
The Hong Kong insurance business also
performed well with respect to premium growth, due
to stronger sales of products with discretionary
participation features (‘DPF’) and an increase in
regular premiums partly offset by a reduction in unit-
linked premiums.
In France, HSBC Assurances performed well in
a declining market, as three promotional campaigns
during the year contributed to growth in sales of
policies with DPF. However, a significant one-off
reinsurance transaction undertaken during 2008
caused net earned insurance premiums to decrease
compared with 2007.
2007 compared with 2006
Reported net earned insurance premiums of
US$9.1 billion were 60 per cent higher than in 2006,
boosted by HSBC’s acquisition in the first half of
2007 of the remaining shares in HSBC Assurances in
France and the purchase of HSBC Bank Panama in
Central America in late 2006. Underlying net
insurance premiums grew by 21 per cent.
Growth in net earned insurance premiums was
achieved in all regions except North America,
primarily from new business growth in the life
insurance business in Europe, Hong Kong and Latin
America. An increase in net earned premiums
was recorded in the UK due to higher sales of
Guaranteed Income Bonds and the introduction of
enhanced death benefits to pension contracts. New
product launches also aided growth in Hong Kong.
In Latin America, higher premiums in Brazil were
driven by increased sales of pension products with
linked-life policies.
In non-life insurance, the UK benefited from a
decision to reduce the proportion of risk and
corresponding premiums ceded to reinsurers
compared with 2006. The Latin American business
also performed well, led by growth in motor
premiums in Argentina. However, results in North
America declined, as a reduction in loan volumes led
to a fall in credit insurance sales and HSBC stopped
reinsuring credit insurance for other lenders.