Wednesday, November 11, 2009

ING Split to Offer Chance to Buy in Emerging Markets

life insurance

Nov. 11 (Bloomberg) -- ING Groep NV’s decision to split off 12 billion euros ($18 billion) of insurance businesses is likely to have competitors jostling for its units in emerging markets on three continents, analysts said.

“ING businesses in growing markets like the Far East, Latin America and central and eastern Europe will be sold for a considerable premium,” said Corne van Zeijl, a senior portfolio manager at SNS Asset Management in the Dutch town of Den Bosch, who oversees about $1.1 billion and owns ING shares.

Amsterdam-based ING plans to separate the insurance operations over the next four years to win European Commission approval for a reorganization plan after receiving a 10 billion- euro cash injection and guarantees on 21.6 billion euros of U.S. mortgage assets from the Netherlands last year.

The split will bring to market businesses with about $64.5 billion of sales, ranking ING as the world’s sixth-largest insurer after Axa SA, Allianz SE, American International Group Inc., Assicurazioni Generali SpA and Aviva Plc, ING said. Fully and partly owned insurance businesses in countries ranging from India to Chile and Poland will be up for sale.

ING rose 6.6 percent to 10.18 euros in Amsterdam, paring its drop since Oct. 23 to 13 percent. That was the last trading day before it released plans to sell assets and raise 7.5 billion euros in a rights offering to repay half the state aid. ING posted third-quarter net income of 499 million euros today, in line with the forecast it made last month.

‘Hands and Feet’

“I have to use hands and feet to count” the expressions of interest in our assets, including some who are looking at the insurance unit as a whole, Chief Executive Officer Jan Hommen told reporters today. “We have plenty of time, we’re not in a hurry, we’re not a distressed seller.”

ING may start evaluating and implementing one or two options “sometime early next year,” he said.

Axa is looking for purchases in emerging markets, CEO Henri de Castries said Nov. 9. He declined to comment on ING’s units. The Paris-based company teamed with AMP Ltd. this week in a bid for the rest of its Asian unit, Axa Asia Pacific Holdings Ltd., that was rejected.

Trieste-based Generali will be “open to opportunities” when prices fall and more insurance assets come to market, co- CEO Giovanni Perissinotto said this week. Aviva CEO Andrew Moss said Nov. 4 the London-based insurer might look at ING assets. Allianz Chief Financial Officer Oliver Baete said this week the company has no “concrete” merger plans.

‘Rare Opportunity’

“The disposals offer a rare opportunity for competitors to get big fast in key growth markets,” said Paul Beijsens, an Amsterdam-based analyst at Theodoor Gilissen Bankiers NV who rates ING “hold.”

ING was created in 1991 with the merger of NMB Postbank Group and insurer Nationale Nederlanden Groep NV. The company had 135 billion euros of assets at the end of that year, which grew to about 1.33 trillion euros by the end of 2008, boosted by takeovers, including Barings Plc, the U.K.’s oldest merchant bank, in 1995.

ING, like Aegon NV and Axa, was drawn to the U.S. life insurance market. After doubling its U.S. life and retirement savings business with the purchase of Equitable of Iowa Cos. in 1997 for $2.6 billion, ING bought ReliaStar Financial Corp. and two Aetna Inc. units for $6.1 billion and $7.7 billion, respectively, in 2000.


In 2008, ING agreed to buy U.S. benefit-plan services company CitiStreet LLC from Citigroup Inc. and State Street Corp. for 578 million euros. The deal made it the third-largest defined-contribution business in the U.S., behind Fidelity Investments and Teachers Insurance and Annuity Association, with $351 billion in assets under management, ING said at the time.

The Aetna purchase also brought ING units outside the U.S., including an insurance venture in Brazil and life and health insurance assets in Malaysia and Thailand.

ING, the biggest Dutch life insurer, said last month that it’s also the No. 2 pension provider in Latin America based on assets under management, the third-largest foreign life insurer based on new sales in Asia and the biggest insurer in central Europe based on assets under management.

ING agreed in September to sell its 51 percent stake in a life insurance and wealth management venture to Australia & New Zealand Banking Group Ltd. for A$1.76 billion ($1.64 billion).

‘Attractive Activities’

“ING’s insurance and investment operations will attract interest,” Frank Stoffel, a London-based analyst at Bank of America Corp.’s Merrill Lynch, said in a note to clients. “It’s not often that top five life insurance and asset management positions in certain Asian” countries become available, said Stoffel, who raised his rating to “buy.”

While world insurance premium volume fell in 2008 for the first time since 1980, premiums in emerging markets registered double-digit growth, Swiss Reinsurance Co. said in a June study. Life premium growth in emerging markets reached 15 percent in 2008, up from 13 percent a year earlier, Swiss Re said.

ING’s insurance income was 27.7 billion euros last year in the Americas, 14.5 billion euros in Europe and 14.2 billion euros in the Asia-Pacific region. Third-quarter pretax profit from insurance, excluding divestments and special items, was 587 million euros, ING said today.

“In our view, 60 percent of ING Insurance consists of attractive activities,” such as Asia, Latin America, central Europe and the U.S. retirement business, Thomas Nagtegaal, an Amsterdam-based analyst at Royal Bank of Scotland Group Plc, wrote in a Nov. 4 note. He raised his rating on ING to “buy.”