Another life insurance company is born, the 17th one to be precise. Further to the announcement in March 2007, Canara Bank, HSBC Insurance (Asia-Pacific) Holdings and Oriental Bank of Commerce, on Saturday, signed a formal agreement in Bangalore to jointly establish a life insurance company in India.

The new company — Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited, will have the following equity holding pattern in the Rs 200 crore paid up capital of the company: Canara Bank will take 51 per cent stake, HSBC Insurance 26 per cent and Oriental Bank of Commerce the remaining 23 per cent.
Since HSBC, the foreign promoter, is paying another Rs 125 crore or Rs 24 per share of Rs 10 as premium, the total capital of the company will be Rs 325 crore (about US$80 million). Canara Bank and OBC, the Indian promoters, are contributing Rs 102 crore and Rs 46 crore, respectively, at the rate of Rs 10 per share.

Strategic opportunity
Canara Bank Chairman & Managing Director M B N Rao told Deccan Herald: “Since HSBC Insurance sees tremendous strategic opportunity in life insurance business in India they found the price right. Indian partners, Canara Bank and OBC, will be bringing in their huge branch network built over 100 years and understanding of the Indian market to the insurance business. Add to it the opportunity of bankassurance business. These will be the contribution from our side apart from the share in equity capital.”   

The company will have access to over 40 million customers and a formidable nationwide distribution network of 3,600 branches throughout India. Mr Rao also pointed out that the company will be jointly managed by the partners while the know how of the business will come from HSBC Insurance which will nominate executives for certain senior roles.

HSBC Holdings Plc Stephen Green said in a press release “the prospects for India's insurance sector are good on the back of expected buoyant economic growth and rising levels of wealth in society. This partnership reinforces our leading position in the emerging markets, and is in line with HSBC's stated strategy of targeting our investment in these markets.”