HSBC Holdings Plc Insurance

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HSBC Holdings plcInsurancePresentation by David FriedGroup General Manager and Group Head of Insurance14 June 2011www.hsbc.com

Forward-looking statementsThis presentation and subsequent discussion may contain certain forward-looking statements withrespect to the financial condition, results of operations and business of the Group. These forwardlooking statements represent the Group’s expectations or beliefs concerning future events andinvolve known and unknown risks and uncertainty that could cause actual results, performance orevents to differ materially from those expressed or implied in such statements. Additional detailedinformation concerning important factors that could cause actual results to differ materially isavailable in our Interim Report. Past performance cannot be relied on as a guide to futureperformance. This presentation contains non-GAAP financial information. Reconciliation of nonGAAP financial information to the most directly comparable measures under GAAP are provided inthe ‘Reconciliation of reported and underlying profit before tax’ supplement available atwww.hsbc.com.This presentation contains non-GAAP financial information. Reconciliation of non-GAAP financialinformation to the most directly comparable measures under GAAP can be found in HSBC’s 2010Annual Report in the Operating and Financial Review.2

AgendaHSBC Insurance: one of the world’s most profitable bancassurersInternational reach and global presenceMaximising the opportunityGlobal insurance businessThe leading bancassurer in Asia3

HSBC Insurance:One of the world’s most profitable bancassurers

In the past two years, HSBC Insurance has beenone of the most profitable bancassurers 3.3PBT of Insurance business, USDbn2.52.42.71.71.51.31.01.10.80.9 1.00.0 l figures are IFRS unless stated otherwise1 as per Brazil GAAP2 as per China GAAPConversion to USD at FY2010 average ratesSource: HSBC Holdings plc – 2010 Annual Results Presentation Banco Bradesco – Management, Preparation and Disclosure ofthe Report on Economic and Financial Analysis and theConsolidated Financial Statements of Bradesco OrganizationBNPPSantanderBank of2China0.1RBS-0.5ING-0.3-0.7FY'10 Itau Unibanco Holding S.A. – 4th Quarter 2010,Management Discussion & Analysis and CompleteFinancial Statements Lloyds Banking Group – 2010 Results Santander – 2010 Financial Report BNP Paribas – Consolidated Financial Statements Year ended 31December 2010 ING – Fourth Quarter 2010 Results RBS – Annual Results 2010: Financial Supplement Bank of China – 2010 Annual Results Announcement5

and among the most profitable insurers in the world9.57.87.7FY’10 PBT, USDbnFY’096.76.15.45.64.94.83.93.73.13.7 3.73.33.13.63.22.92.72.52.62.3 2.22.12.12.1 2.01.8 1.82.01.61.51.21.11.91.41.31.20.9 0.70.6 0.80.50.60.10.3(0.1)(0.6)(1.1)-11Source: Allianz – Preliminary key figures 4th quarter andfiscal year 2010 AIG – Financial Supplement Fourth Quarter 2010 AXA – Full Year 2010 Earnings, FinancialSupplement ZFS – Business Operating Profit By BusinessSegment, Zurich, Financial Services Group Aviva – Preliminary Results 2010 Pru Fin – Quarterly Financial Supplement, FourthQuarter 2010, Prudential Financial, Inc. Sun Life – 2010 Fourth QuarterSupplementary Financial Information,Sun Life Financial Inc. Standard Life – Preliminary Results2010 Resolution – Preliminary auditedresults for the year ended 31December 2010 Lincoln – Statistical Report ForthQuarter LifeResolutionStdLifeSunL&GAIA Aegon – Q42010 Results Nippon – FY2010 Results Pru – Prudential plc 2010 Results Hartford – Annual Report 2010, TheHartford Financial Services Group,Inc. Tokio Marine – FY2011 Business Plan(Adjusted Earnings Basis) AIA – 2010 Results Presentation L & G – Legal & General Group plcPreliminary Results 2010522 ACE – Annual Report 2010 China Life – Announcement of results forthe year ended 31 December 2010 Met Life – Fourth Quarter FinancialSupplement, December 31, 2010 HSBC – HSBC Holdings plc 2010 AnnualResults Presentation Travellers – Financial Supplement –Fourth Quarter 2010, The TravelersCompanies, naLifeFinPruAvivaMetlife5Notes: PBT as per IFRS unlessotherwise stated 2 as per Canadian GAAP 3 as per China GAAP 4 as per Japanese GAAP 5 as per US GAAP Conversion to USD atFY2010 average ratesZFSAXA5AIGAllianz5(1.5) Dai Ichi – Financial Results for theFiscal Year Ended March 31, 2011 RSA – Media Release for Year EndResults 2010 Manulife – Statistical InformationPackage Q4 2010 New York Life – Annual Statement forthe year ended December 31, 20106

InsuranceDelivering sustainable and profitable growthUSDbn12009% Better2010 / (worse)Net earned premiums10.511.1 64.03.3(17)Investment income2Net insurance claimsincurred and movements inliabilities to policy holders2Profit before tax by region, USDbn2.01.0(12.3)(11.7) 5PVIF movement30.60.7 16Net underwriting result2.83.4 25Net fee income1.01.0(2)Other operating income0.10.1(34)Net operating income3.94.5 16(1.9)(1.9)0Operating profit2.02.6 31Associates & joint ventures0.50.7 400.0Total operating expensesAsiaLatin America2009EuropeNorth America2010Profit before tax by product category4, USDbn1.51.00.5Contribution frominsurance business2.53.3 330.0Life, Pensions andInvestments2009Credit EnhancementServicesGeneral and Other2010Notes:1. Underlying basis2. Investment income includes net income from financial instruments designated at FV (FY 2009: USD2.4bn, FY 2010: USD1.4bn). To the extent that these investment gains and losses are passed to policyholders, an offsettingentry will flow through the net insurance claims incurred and movements in liabilities to policy holders3. Present value of in-force long-term insurance business4. Excludes Ping An7

Adding value through a profitable bancassurance modelAgency-based insurersHSBC’s modelCommissionkept within theGroupDistribution PBTCommissionpaid out todistributorsManufacturing PBTInternalises profits agency-based insurers pay for agency distribution8

International reach and global presence

Global manufacturing and distribution reachHSBC Insurance’s globalreachManufacturing life,non-life and pensionsbusinesses in more than20 countries and territoriesDMDM DDM DDM DDDMDDistribution capabilityin 54 countries and territories1DMDMDMDDM DDDDDDDMDMDDDDDM D DDDMDDMDDDMDDMDMDMDDMDMDDD6,500 staff plus 2,000 in jointventure companiesDMDDDDMDDc20 million policyholders andaccess to HSBC’s customerbase of 100 millionM Manufacturing siteD Distribution siteEmerging Markets: Asia, Africa, Middle East, Eastern Europeand Latin AmericaDeveloped Markets: North America, Continental Europe,Australia and New ZealandNote:All figures are as at 31 December 2010 except otherwise specified. Staff numbers include joint ventures1 . Updated on 31 May 201110

HSBC Insurance’s worldwide operationsFranceNorth AmericaHSBC Insurance Agency (USA); annuities inHBUSHousehold life insurance companyHSBC P&C companyUK & IrelandHSBC Assurance Vie(France) ; HSBC AssuranceIARD (France)manufacturing Life, GI &Investment products fordistribution through HSBCnetworkRest of EuropeUKHSBC manufactures Life, Pensions and Investments products within HSBC Life (UK) Limitedfor distribution, along with GI Products, through the HSBC network, First Direct and M&SMoneyGI products are underwritten by 3rd party insurance companies, including Aviva and AllianzIrelandHSBC Life (Europe) manufactures investment products for distribution throughout the EUunder a "passporting" modelZurich Branch of HSBC Life (Europe) established to support EU-wide wrapped investmentproduct through Private Bank and PFSMexicoHSBC SegurosHSBC AforeHSBC PensionesSeguros provides a range of Life and GI productsdistributed through HSBC bank branchesHSBC Pensiones provides annuities andsurvivorship insuranceChinaHSBC Life Insurance Company Limited – 50%ownedPartnered with Shanghai Hua Yu AssetManagement and Beijing Zhang Ke Engineeringcompany16% stake in Ping An InsuranceCentral & South AmericaHong KongPanamaHSBC SegurosManufactures Life and GI products offered toBank customers and open marketHondurasHSBC Seguros – 89% ownedManufactures Life and GI products offered toBank customers and open marketEl SalvadorHSBC Seguros – 96% ownedManufactures Life and GI products offered toBank customers and open marketHSBC Insurance (Asia Pacific) Holdings LimitedHSBC Life (International) LimitedHSBC Insurance (Asia) LimitedHang Seng Insurance Company Limited andHang Seng General Insurance Company Limited– subsidiaries of Hang Seng Bank (62% ownedby HSBC)Rest of AsiaArgentinaHSBC LBA Seguros – 98% owned manufactureGI productsJVs with New York Life– HSBC NYL Seguros de Vida – 60% ownedmanufacture Life products– HSBC NYL Seguros de Retiro – 60% ownedmanufacture Annuities productsDistributes through HSBC’s insurance arm andthe network of more than 2,000 points of sale(HSBC branches and other Bank's network)MaltaInsurance products manufactured within HSBCLife Assurance (Malta) Ltd for distribution throughthe local HSBC networkTurkeyDistribution of 3rd party credit and stand-aloneinsurance through HSBC network and telephonechannelsCentral & Eastern EuropeDistribution of HSBC Life (Europe) manufacturedInvestment Bond through Polish HSBC network3rd party manufactured insurance through HSBCnetworkBrazilHSBC Seguros manufactures Life, Pension and Capitalizationproducts for distribution through HSBC network, retailers and otherchannelsLong-term distribution agreement whereby HDI a subsidiary ofTalanx offers GI products through the HSBC Brazil branch networkfollowing 2005 sale of HSBC GI arm to HDIMiddle EastSaudi Arabia33% stake in SABB TakafulHSBC distribution networkutilising 3rd party insurers,including AIG (UAE) and Allianz(Egypt)India26% stake in Canara HSBCOriental Bank of Commerce LifeInsurance CompanyMalaysiaHSBC Amanah Takaful– 49% JV with Jerneh Asia Berhad and TheEmployee Provident Fund of Malaysia– Offers Shariah compliant insurance (home,fire, motor, mortgage)MacauBranches of HSBC Life (International) Limitedand HSBC Insurance (Asia) LimitedSingaporeHSBC Insurance (Singapore) Pte LimitedVietnam18% stake in Bao Viet, Vietnam’s leadinginsurance and financial services groupSouth Korea50% less 1 share in Hana HSBC Life InsuranceCompany LtdTaiwanHSBC Life branch11

Maximising the opportunity

GDP Growth – Emerging Markets vs Developed MarketsGlobal economic trendsImplications for insuranceEmerging markets growing faster than developed markets110 years ago35%Today40%10 years’ time50%Share of global GDPDeveloped50%60%65%The enormous consumption power inemerging markets will continue tofuel their economic activities andGDP growthEmergingThe increase in economic activity willresult in more insurance consumptionby enterprises big or small to protecttheir assets, property and employeesGrowth in personal wealth creates theneed for insurance products catering forsaving, investment, capitalaccumulation, wealth management andprotectionGDP growth2, Mainland China20052007India2009BrazilNote:1. HSBC Global Research and IMF as at Sep 20102. Thomson Financial Datastream13

Dynamic GDP growth in Asia’s biggest emerging marketsChina and India grew 5 and 3 times faster than US over the past 20 yearsChina is delivering 50 years of US progress every 10 years1990 Int. GK 11990 Int. GK Timeline of US GDP per 0,000China(2010)5,000019251950China19752000India is delivering 30 years of US progress every 10 years1990 Int. GK Timeline of US GDP per capita1990 Int. GK 0)18755,0000190019251950India19752000Source: Maddison data, IMFNote:1. Geary–Khamis' method of comparing cross-country purchasing power parity levels14

Global trade growth shifting to Emerging MarketsGlobal economic trendsThe dominant global trade flows used tobe from US / Europe to Asia. They arenow leaning more towards China andIndiaIn 2009, trade size within East Asia was almost 90% of US plus EUIn the last two decades:USD185bnUSD1,151bn–Within Asia, the share of globalexports increased by almost 30%and the share of global importsincreased by nearly 40%–The share of global exports of Asiato the US decreased by almost 40%–The share of global imports of Asiafrom US decreased by almost de within East AsiaAsia’s trade flows to other emergingmarkets such as Latin America andAfrica have increased substantiallyExports from East Asia to ROWNote: Total trade in USDSource: HSBC estimatesSource: HSBC estimatesImplications for insuranceThe growing importance of Asia’s intra-regional trade especially among the fastest growing emerging markets1 fuelsinternal consumption and further economic growth and development. The result is an increase in wealth, leading toincreased spending on insuranceNote:1. Excluding Hong Kong and Singapore15

Global ageing populationGlobal population trendsLongevity increasing virtually everywhere People aged 60 and over (%)302010019802000WorldMore developed2025Less developedEuropeSource: HSBC estimatesBy 2050, of the 2 billion globalpopulation aged over 60, 62% or1.24 billion will be residing inAsia’s emerging marketsPercentage aged 60 or over0–910–1920–2425–2930 No dataSource: UN Population Ageing 200616

Insurance & Investment needs accelerate whenpeople matureFinancial needs map HighWealth and the power of planningBank(Credit)ProductsInsurance &InvestmentneedsLowYouthAgeMatureThose over 45 currently possess between 75% and upto 88% of all personal financial assets in US, Canada,UK and Japan1These individuals and their assets need insuranceprotection and wealth managementFindings of HSBC’s latest research2 covering 17,000people in 17 countries:Those with a plan on average have nearly two and ahalf times (245%) more retirement savings/investmentsthan those who do not, across a wider range of products– the ‘planning premium’. Planners also have a morepositive outlook towards later life, and worry less aboutcoping financially in retirementThose who combine financial planning with professionalfinancial advice enjoy the best of both worlds, with overthree-and-a-half times (357%) more retirement assetsthan non-planners – the ‘advice advantage’Note:1. From Federal Reserve Bank of St. Louis, Human Resources and Skills Development Canada, HM Revenue and Customs and Ageing in Japan: The Health and Wealth of Older Persons2. The power of planning report, the sixth series of HSBC’s Future of Retirement Programme17

Insurance Penetration – Premiums as a percentage of GDPInsurance penetrationPremiums spend grows as per capita GDP increasesLife premiums / GDP12%14%10%10%Taiwan12%Hong Kong SAR10%8%South urce: Sigma, Swiss Re: World Insurance in 2008; penetration datastarts from 1970 unless specified; real capital GDP inlogarithmic scale1.010.0100.0Real GDP per capita (USD'000)Source: Swiss Re Jan 07; penetration data starts from 1970 unless specified; real capital GDP in logarithmic scale18

Global insurance business

UK, Europe & Middle EastUKInsurance sold through HSBC, firstdirect and M&SbrandsLife insurance and pensions are almost all selfmanufactured while non-life products are mainlysourced from 3rd party providersRationalisation of the various insurance businessescompleted; significant simplification of business modelFranceThe life insurance market accounts for 78% of FrenchRetail market investment AuM (50% of all AuMincluding Deposits (2010))1HSBC manufactures life and non life insurance viaHSBC Assurance Vie and IARDRecent development of Insurance Sales Managers aswell as Commercial Banking experts will contribute tostrengthen the business in the futureThe Rest of Europe and Middle EastProfitable insurance business in Malta with 51%market share2No. 4 distributor of life insurance in Egypt3Successful distribution business in TurkeyNotes:1. Federation Frances de Societie Assurance2. Malta Insurance Authority by APE3. Egyptian Financial Supervisory Authority20

Latin America and North AmericaLatin AmericaIn 2010, Latin America continued to show significant,profitable growth for the fourth consecutive yearDiverse insurance operations throughout the region withproducts being distributed through the branch network,direct channels, specialised sales forces and independentbrokers / agentsProduct portfolio is supported by a combination of HSBCmanufacturing and Preferred Strategic Partners andincludes a wide variety of Life, Pension, Capitalisation,Credit Enhancement Services and General InsuranceproductsNorth AmericaIn 2010, net premiums declined, due to decreasedsales of payment protection following thediscontinuance of mortgage originations in HSBCFinance CompanyInsurance business is conducted in US and Canada,with the vast majority of premiums generated in theUSA full suite of life and annuity products aredistributed through US HSBC branchesProducts are sold through the branch network, directvia call centre and on line21

The leading bancassurer in Asia

HSBC Insurance in AsiaStrategic expansion ofmanufacturing capacity2006–2009Malaysia, 2006Presence in Asia’s fastest growing emerging marketsMacau –Life & Non-lifeBranches of HSBC Insurance (Asia)Ltd and HSBC Life Int’l LtdHSBC Life (International) Ltd – 100% ownedHSBC Insurance (Asia) Ltd – 100% ownedHSBC Insurance (Asia Pacific) HoldingsLimitedHang Seng Insurance Company Ltd and HangSeng General Insurance Company Ltd – 62%ownedTaiwan, 2007Vietnam, 2007South Korea, 2008India, 2008Malaysia –Life & Non-lifeHSBC Amanah Takaful Sdn Bhd –49% ownedJapanBranch of HSBC LifeInternational LtdSignificant investmentin 2002IndiaSouth Korea – LifeChinaHong KongMacauTaiwanThailandVietnamHong Kong, 1974Singapore, 2002Vietnam – Life & Non-lifeSouth KoreaTaiwan – LifeMacau, 1984HSBC Insurance (Singapore)Pte Limited – 100% ownedBao Viet – 18% stakeMainland China in 2009HSBC Insurance also hasmanufacturing capacity inSingapore –Life & Non-lifeHong Kong – Life & Non-lifeSri LankaMauritiusIndia – LifeMalaysiaSingaporeHana HSBC Life InsuranceCompany Limited – 50% lessone sharePhilippinesBruneiChina – Life & Non-life(incl Ping An)IndonesiaHSBC Life Insurance CompanyLimited – 50% owned16% stake in Ping An Insurance(Group) Company of ChinaCanara HSBC Oriental Bank ofCommerce Life Insurance –26% stakeAustraliaPing An in Mainland ChinaNew ZealandManufacturing in 9 marketsDistribution in 18 markets23

Leveraging network and strategic partnershipsDistribution channelsSites anchnetwork ofsubsidiarybanksBranchnetwork rcesInsuranceBrokers /IndependentFinancialAdvisersHong KongSingaporeMalaysiaTaiwanSouth KoreaIndiaMainland ChinaVietnamMacauThrough HSBC’s branch networks, products are also distributed in Indonesia, Thailand,the Philippines, Japan, Australia, New Zealand, Brunei, Mauritius and Sri Lanka24

Market leading in Asia with dynamic propositionsLeading bancassurer in the regionPBT exceeded USD1bn1Provides protection, wealth and retirement solutions to nearly 4 million customers through more than 6,600 outlets in 18 marketsHong KongSingaporeMalaysiaTaiwanMaintained No.1 position in all majorlines of business2 in 1Q 2011:Life (new business) – 27% of shareof the marketPension business – 32.3% of shareof funds under management of themarketAlso No. 1 position in 2010:Non-l

Q42010 Results Nippon – FY2010 Results Pru – Prudential plc 2010 Results Hartford – Annual Report 2010, The Hartford Financial Services Group, Inc. Tokio Marine – FY2011 Business Plan AIA – 2010 Results Presentation L & G – Legal & General Group plc Preliminary Results 2010 Sun Life – 2010 Fourth .

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