HSBC has agreed to sell its health and life insurance business in Singapore to German insurance group Allianz for $2.1bn (£1.6bn), as the FTSE 100 bank shifts its focus toward wealth management in the city-state.

The transaction is expected to close in the first half of 2027, subject to regulatory approval. Once completed, HSBC and Allianz will begin a 15-year partnership under which the London-listed bank will continue offering insurance products to its retail banking and wealth clients in Singapore. The products, however, will be owned and underwritten by Allianz.

That structure allows HSBC to keep insurance as part of its customer offering while moving the capital and underwriting responsibility to a specialist insurer. Banks commonly use such distribution partnerships to support wealth and retail clients without owning the full insurance manufacturing business.

HSBC expects the sale to generate a pre-tax gain of £1.4bn. The bank will also receive an additional upfront payment of £150.1m.

The disposal follows a strategic review by HSBC, which concluded that the transaction would deliver the “best outcome” as part of the bank’s continuing effort to simplify its group operations.

HSBC continues business streamlining

Chief executive Georges Elhedery, who took charge of HSBC in 2024, has moved quickly to reshape the bank after launching a major restructuring plan in October 2024.

HSBC had set a target of delivering £1.1bn in annual cost reductions by the end of 2026, but reached that goal ahead of schedule in June.

Elhedery has said a substantial share of the savings has come from reducing headcount, including a 15 per cent cut in managing director roles.

As part of the overhaul, HSBC’s UK and Hong Kong operations were converted into standalone units. Elhedery also reorganised the bank’s operations between eastern and western regions, at a time when falling interest rates were weighing on profits.

The Allianz agreement also follows Elhedery’s rejection of claims that he intended to spin off HSBC’s Asia business. Speaking at a summit at the end of last year, he said the bank’s presence in the region was “something our customers need”.

HSBC said selling the insurance business would allow it to concentrate on “areas where it has a clear competitive advantage”. The bank also reaffirmed its commitment to Singapore, describing the market as “crucial” to its future growth.

Singapore is a significant wealth management hub in Asia, making the ability to keep offering insurance products relevant to HSBC’s broader client strategy even as it exits ownership of the local health and life underwriting business.

Allianz gets another route into Singapore

For Allianz, the HSBC deal provides another opportunity to expand in Singapore after a previous attempt to enter the market through a high-profile acquisition was blocked.

In 2024, Allianz was forced to withdraw from a $2.2bn (£1.7bn) bid to buy Income Insurance after Singapore’s parliament raised concerns about the transaction and amended the Insurance Act to prevent it from proceeding.

Allianz expects the transaction with HSBC to produce a double-digit return in the medium term. The next step for both companies is securing the required approvals before the planned completion window in the first half of 2027.