HSBC Holdings plc Insurance Presentation by David Fried Group General Manager and Group Head of Insurance 14 June 2011 www.hsbc.com Forward-looking statements This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Group. These forward- looking statements represent the Group’s expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our Interim Report. Past performance cannot be relied on as a guide to future performance. This presentation contains non-GAAP financial information. Reconciliation of non- GAAP financial information to the most directly comparable measures under GAAP are provided in the ‘Reconciliation of reported and underlying profit before tax’ supplement available at www.hsbc.com. This presentation contains non-GAAP financial information. Reconciliation of non-GAAP financial information to the most directly comparable measures under GAAP can be found in HSBC’s 2010 Annual Report in the Operating and Financial Review. 2 Agenda HSBC Insurance: one of the world’s most profitable bancassurers International reach and global presence Maximising the opportunity Global insurance business The leading bancassurer in Asia 3 HSBC Insurance: One of the world’s most profitable bancassurers In the past two years, HSBC Insurance has been one of the most profitable bancassurers… 3.3 PBT of Insurance business, USDbn 2.7 2.5 2.4 1.7 1.5 1.3 1.1 1.0 0.9 1.0 0.8 0.0 0.1 0.1 HSBC Banco Lloyds Itau1 BNPP Santander Bank of RBS ING 1 2 -0.3 Bradesco Group China -0.5 -0.7 FY'09 FY'10 Notes: Source: th All figures are IFRS unless stated otherwise • Itau Unibanco Holding S.A. – 4 Quarter 2010, • BNP Paribas – Consolidated Financial Statements Year ended 31 • HSBC Holdings plc – 2010 Annual Results Presentation December 2010 1 as per Brazil GAAP Management Discussion & Analysis and Complete • Banco Bradesco – Management, Preparation and Disclosure of Financial Statements • ING – Fourth Quarter 2010 Results 2 as per China GAAP the Report on Economic and Financial Analysis and the • Lloyds Banking Group – 2010 Results • RBS – Annual Results 2010: Financial Supplement Conversion to USD at FY2010 average rates Consolidated Financial Statements of Bradesco Organization • Santander – 2010 Financial Report • Bank of China – 2010 Annual Results Announcement 5 … and among the most profitable insurers in the world 9.5 7.8 7.7 PBT, USDbn 6.7 FY’09 FY’10 6.1 5.6 5.4 4.9 4.8 3.9 3.7 3.7 3.7 3.6 3.3 3.2 3.1 3.1 2.9 2.5 2.7 2.6 2.3 2.2 2.1 2.0 2.1 2.1 2.0 1.9 1.6 1.8 1.8 1.5 1.4 1.2 1.1 1.2 1.3 0.8 0.6 0.9 0.70.6 0.5 0.3 0.1 (0.1) (0.6) -11 (1.1) (1.5) 2 2 5 5 2 5 4 4 5 5 5 3 4 5 z n n n Fin C on o rd IA G io ne ife ian AIG AXA ZFS viva ACE p Pru fo A & Life t col RSA L ulife ll A a Life HSB L n u ai Ichi A Metlife Pru n Nip Aeg Std Life ol Lin Mari NY D an ravellers Hart Su o M Chi T Res Toki Notes: Source: • PBT as per IFRS unless • Allianz – Preliminary key figures 4th quarter and • ACE – Annual Report 2010 • Aegon – Q42010 Results • Sun Life – 2010 Fourth Quarter • Dai Ichi – Financial Results for the otherwise stated fiscal year 2010 • China Life – Announcement of results for • Nippon – FY2010 Results Supplementary Financial Information, Fiscal Year Ended March 31, 2011 • 2 as per Canadian GAAP • AIG – Financial Supplement Fourth Quarter 2010 the year ended 31 December 2010 • Pru – Prudential plc 2010 Results Sun Life Financial Inc. • RSA – Media Release for Year End • Standard Life – Preliminary Results 3 • • Met Life – Fourth Quarter Financial • Hartford – Annual Report 2010, The Results 2010 • as per China GAAP AXA – Full Year 2010 Earnings, Financial 2010 Supplement Supplement, December 31, 2010 Hartford Financial Services Group, • Manulife – Statistical Information • 4 as per Japanese GAAP • HSBC – HSBC Holdings plc 2010 Annual Inc. • Resolution – Preliminary audited Package Q4 2010 • ZFS – Business Operating Profit By Business results for the year ended 31 • 5 as per US GAAP Segment, Zurich, Financial Services Group Results Presentation • Tokio Marine – FY2011 Business Plan • New York Life – Annual Statement for December 2010 the year ended December 31, 2010 • Conversion to USD at • Aviva – Preliminary Results 2010 • Travellers – Financial Supplement – (Adjusted Earnings Basis) Fourth Quarter 2010, The Travelers • AIA – 2010 Results Presentation • Lincoln – Statistical Report Forth FY2010 average rates • Pru Fin – Quarterly Financial Supplement, Fourth Quarter 2010 6 Quarter 2010, Prudential Financial, Inc. Companies, Inc. • L & G – Legal & General Group plc Preliminary Results 2010 Insurance Delivering sustainable and profitable growth % Better Profit before tax by region, USDbn USDbn1 2009 2010 / (worse) 2.0 Net earned premiums 10.5 11.1 +6 Investment income2 4.0 3.3 (17) 1.0 Net insurance claims incurred and movements in (12.3) (11.7) +5 liabilities to policy holders2 0.0 3 PVIF movement 0.6 0.7 +16 Asia Latin America Europe North America Net underwriting result 2.8 3.4 +25 2009 2010 Net fee income 1.0 1.0 (2) Profit before tax by product category4, USDbn Other operating income 0.1 0.1 (34) 1.5 Net operating income 3.9 4.5 +16 1.0 Total operating expenses (1.9) (1.9) 0 0.5 Operating profit 2.0 2.6 +31 Associates & joint ventures 0.5 0.7 +40 0.0 Life, Pensions and Credit Enhancement General and Other Contribution from Investments Services 2.5 3.3 +33 insurance business 2009 2010 Notes: 1. Underlying basis 2. 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 offsetting entry will flow through the net insurance claims incurred and movements in liabilities to policy holders 3. Present value of in-force long-term insurance business 4. Excludes Ping An 7 Adding value through a profitable bancassurance model HSBC’s model Agency-based insurers Commission Commission kept within the paid out to Group distributors Distribution PBT Manufacturing PBT Internalises profits agency-based insurers pay for agency distribution 8 International reach and global presence Global manufacturing and distribution reach HSBC Insurance’s global reach Manufacturing life, non-life and pensions businesses in more than M D D 20 countries and territories M D M D D D D D M D D D D D M D D D D M D D M D M D Distribution capability D D M D D D M D 1 M D M D M D D M D in 54 countries and territories M D D M D D M D M D D D D D D M D M D D D 6,500 staff plus 2,000 in joint D M D venture companies D D D M D D c20 million policyholders and access to HSBC’s customer base of 100 million M Manufacturing site D Distribution site Emerging Markets: Asia, Africa, Middle East, Eastern Europe and Latin America Developed Markets: North America, Continental Europe, Australia and New Zealand Note: All figures are as at 31 December 2010 except otherwise specified. Staff numbers include joint ventures 1 . Updated on 31 May 2011 10 HSBC Insurance’s worldwide operations France UK & Ireland Rest of Europe HSBC Assurance Vie UK Malta (France) ; HSBC Assurance HSBC manufactures Life, Pensions and Investments products within HSBC Life (UK) Limited Insurance products manufactured within HSBC IARD (France) for distribution, along with GI Products, through the HSBC network, First Direct and M&S Life Assurance (Malta) Ltd for distribution through manufacturing Life, GI & Money the local HSBC network North America Investment products for GI products are underwritten by 3rd party insurance companies, including Aviva and Allianz Turkey HSBC Insurance Agency (USA); annuities in distribution through HSBC Ireland Distribution of 3rd party credit and stand-alone HBUS network HSBC Life (Europe) manufactures investment products for distribution throughout the EU insurance through HSBC network and telephone Household life insurance company under a "passporting" model channels HSBC P&C company Zurich Branch of HSBC Life (Europe) established to support EU-wide wrapped investment Central & Eastern Europe product through Private Bank and PFS Distribution of HSBC Life (Europe) manufactured Investment Bond through Polish HSBC network 3rd party manufactured insurance through HSBC Mexico network HSBC Seguros HSBC Afore HSBC Pensiones China Seguros provides a range of Life and GI products distributed through HSBC bank branches HSBC Life Insurance Company Limited – 50% HSBC Pensiones provides annuities and owned survivorship insurance Partnered with Shanghai Hua Yu Asset Management and Beijing Zhang Ke Engineering company 16% stake in Ping An Insurance Central & South America Hong Kong Panama HSBC Insurance (Asia Pacific) Holdings Limited HSBC Seguros HSBC Life (International) Limited Manufactures Life and GI products offered to HSBC Insurance (Asia) Limited Bank customers and open market Hang Seng Insurance Company Limited and Honduras Hang Seng General Insurance Company Limited HSBC Seguros – 89% owned – subsidiaries of Hang Seng Bank (62% owned Manufactures Life and GI products offered to by HSBC) Bank customers and open market El Salvador Rest of Asia HSBC Seguros – 96% owned Manufactures Life and GI products offered to Malaysia Bank customers and