France’s AXA Group has concluded an agreement to purchase 100 percent of the share capital of the ING Group’s Mexican insurance subsidiary ING Seguros, for $1.5 billion (app. €1 billion).
ING Seguros is the third largest Mexican insurer with approximately 12 percent of total market share, and 5.5 million policyholders. Its main activities are in auto insurance (with a 17 percent market share) and health coverage, where it is the second largest player with a 19 percent market share.
AXA noted that ING Seguros is also active “on the Life market with a 6 percent market share. ING Seguros’ franchise is supported by an extensive proprietary distribution network of 7,500 agents, of which 1,500 specialized life agents.”
ING Seguros is expected to post revenues of $1.9 billion for 2007, and to have a combined ratio of around 105 percent, with a net income at break even and shareholders’ equity of approximately $900 million.
A bulletin from ING noted that the Group is divesting “companies that comprise its non-life businesses of P&C and Auto, plus its Health and Life insurance lines, its Health Maintenance Organization (ISES) and its Bonding Business.” ING will keep its existing Mexican pension (Afore) and Annuities businesses, which it hopes to expand. The bulletin did not explain how “Life insurance” came to be included as part of its “non-life” business.
ING Executive Board Chairman Michel Tilmant indicated that the “divestment is part of ING’s strategy to focus its activities on its core expertise of banking, investments, life insurance and retirement services. ING continues to accelerate the redeployment of its capital in line with this strategy.”
AXA said that when it takes over ING Seguros it “intends to accelerate and complete” the turnaround initiated by ING by “dedicating seasoned management capabilities and leveraging the Group’s global platforms and expertise, notably in IT and einsurance.”
Upon completion of the transaction, AXA plans to integrate ING Seguros into its “Mediterranean Region unit,” although Mexico is usually considered part of North America. The justification would seem to be AXA’s belief that the Company would “benefit from its know how in underwriting, claims management, client segmentation, service and brand management.”
AXA also indicated that by “combining its strong franchise and AXA’s expertise, ING Seguros should be in a position to benefit from the strong growth prospects of the Mexican market, an improved pricing environment and the emergence of under-developed segments (e.g. Household insurance), while extending its product range, particularly in the savings market.”
Henri de Castries, Chairman of AXA’s Management Board indicated that the “acquisition gives us a leading position in a large growth market on attractive conditions, as we believe we can leverage our know-how to restore ING Seguros’ growth and profitability. Together with our recent transactions in Asia, Eastern Europe and the Mediterranean region, ING Seguros’ franchise on the Mexican market strengthens AXA’s growth profile, contributing to our Ambition 2012 plan and beyond.”
AXA said it would finance the transaction from internal resources. It expects to complete the acquisition, which is subject to regulatory approvals, during 2008.
ING indicated that based on the purchase price of €1 billion, it expects to realize a capital gain on the sale in a range between €150 and €200 million ($145 and $291 million), “depending upon the final balance sheet and closing adjustments.”
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