Recapitalisation of group needed after HSBC fails to attract buyer for its underperforming business
HSBC has put an £80m injection of cash into its motor underwriting business as it seeks to sell the business.
The cash injection is believed to relate to poor results in 2008 and concerns over low reserves.
The chief executive of HSBC Insurance UK – formerly Corinthian Policies – Martyn Capewell and other senior members of the management team left the insurer last month, as revealed by Insurance Times.
Although the motor underwriting business has been on the market since last year it has struggled to find a buyer. Former chief executive Andrew Gibson has been touted as a possible candidate to lead a private equity-backed acquisition, although he is not thought to be in negotiations at present.
A document filed with Companies House this week shows that HSBC Insurance Brokers Holdings Limited, parent company of HSBC Insurance UK and HSBC Insurance Brokers, put £80m into the underwriting business.
A source close to HSBC said: “It recapitalised the motor underwriting business, as part of its efforts to sell it.” Asked if this related to under-reserving, the source replied: “You recapitalise for whatever reason you have to, don’t you?”
A senior market source added: “It had spent its capital and had to put more money in.”
The latest developments come at a time of increasing pressure on the motor market. Exclusive analysis by actuarial consultant EMB published in Insurance Times last week suggested that reserves in the market were beginning to run low, with just £880m released in 2008 compared to £1.1bn in 2007. The market’s combined ratio was 105.5%, with not a single one of the top 20 motor insurers turning a profit in the private motor sector.
HSBC refused to comment, with a spokesman repeating a statement provided last month in relation to the departure of the senior management team. It said: “We have been reviewing a range of options for some time and the review is ongoing. For the time being, it is ‘business as usual’ for our customers and our staff.”